The Gothaer Group Annual Report 2010

Transcription

The Gothaer Group
Annual Report 2010
Financial Highlights
Key Figures
(consolidated in accordance with IFRS)
€ million
Five-year summary of key figures
Financial Year
2010
2009
2008
2007
2006
Gross premiums written*
Net premiums earned*
4,002.9
3,250.7
4,248.6
3,362.1
4,039.4
3,043.2
3,945.1
3,069.6
3,856.6
3,032.4
Policyholder benefits (net)
3,350.3
3,375.5
2,436.2
3,389.8
3,126.4
673.9
648.3
690.8
673.0
627.0
81.7
76.4
62.1
131.2
120.3
22,877.3
22,585.1
21,451.2
21,885.9
21,380.9
822.2
664.9
711.6
1,316.6
977.5
20,791.4
20,349.2
19,154.9
19,260.9
18,417.4
1,152.8
1,065.7
942.2
1,046.9
1,070.7
5,262
5,350
5,466
5,610
5,730
Underwriting expenses (net)
Consolidated profit for the year
Investments
Investment result
Underwriting reserves (net)
Group equity
Employees (average number)
* Including premiums from the reserve for premium refunds
The Gothaer Group
With over 3.5 million members and premium income of 4 billion Euro, the Gothaer Group ranks among
Germany’s major insurance groups and is one of the country’s largest mutual insurance associations.
By offering high-quality risk-management and financial concepts, we give our customers comprehensive
solutions that go well beyond the usual scope of insurance and financial products. We attempt to make
dealing with insurance and financial matters as pleasant and as simple as possible for our customers.
Our employees make every effort to take the burden off of our customers and act in their best interests in all
respects. This, in combination with the quality of our service and support, distinguishes us from our
competitors. This approach results in noticeable added value for our customers and marketing partners.
Gothaer’s customers are for the most part private individuals and medium-sized companies. We offer a wide
variety of insurance products, not only in the personal area, but also for small and medium-sized companies,
the self-employed and freelancers.
Financial Highlights
The Business Units
Gothaer Versicherungsbank VVaG, a mutual insurance association, is the Group parent. The Group’s financial
activities are managed by Gothaer Finanzholding AG.
Operational activities are handled mainly by the companies listed below:
Gothaer Allgemeine Versicherung AG is the risk-bearing entity in the area of property and casualty insurance
within the Gothaer Group. This company has ranked among the largest German property insurance companies ever since its foundation in the year 1820. Its focus is primarily on comprehensive insurance concepts
and multiple-risk products. Custom solutions that take into account the specific requirements of different
branches of business and industry make Gothaer a reliable partner, not only for private clients, but also for
commercial clients from mid-sized companies and industry.
Gothaer Lebensversicherung AG can look back on 180 years as a partner offering insurance protection and
financial planning strategies. In the insurance cover area, Gothaer Leben positions itself with innovative
biometric products like Gothaer Perikon as dread disease product or the new Gothaer PflegeRent Invest, the
first unit-linked long-term care pension insurance on the German market. In private retirement planning,
product flexibility is the central feature enabling the client to adapt the product optimally to his personal
circumstances in every phase of life. With over four decades of experience, company pension plans are an
important growth field. Besides future-geared subjects like working time accounts, there are holistic
solutions available which, in addition to the appropriate products and comprehensive advice, also offer
support in launching and communicating solutions for enterprises and their workforces.
As the healthcare provider of the Gothaer Group, Gothaer Krankenversicherung AG provides policyholders
not only with customized insurance coverage and reimbursement of medical expenses, but also with
extensive advice in the area of healthcare and comprehensive support in the event of illness. Mainstay
services include preventive measures, active consultation for those with chronic medical problems and case
management for especially severe illnesses The private health insurance sector received quite a boost in
2010 and, in spite of simultaneous massive counter-currents from the government’s health policy, was able
to report significant growth. In addition to classic business in comprehensive healthcare plans, Gothaer is
very well positioned in supplementary insurance as well. In the years to come, efforts in this area will also
focus on group insurance and corporate healthcare management.
The Asstel Insurance Group complements the Gothaer Group’s portfolio with a direct insurer, which offers
standardized, economical products in the life, health and property insurance segments to private clients
throughout Germany since 1997. Asstel’s foucus is on direct business with a special emphasis on online
marketing. As customer totals grow, existing customer business, too, plays an ever-greater role. A further
mainstay at Asstel is cooperation business. Here, Asstel offers especially attractive insurance conditions for
whole workforces and customer groups in enterprises as well as members of associations. In recent years,
the company has quickly worked its way up to the top in many rankings of products, services and providers.
Janitos Versicherung AG was established in 2005 as an independent brand in the Gothaer Group. The specialized broker insurer operates in the assets and health fields where it is performing well with its combination
of high-quality product solutions and efficient processes. In the Janitos Multi-Rente for adults and children,
the Company has succeeded in creating a product with a novel scope of benefits that offers cover against
financial burdens due to sickness or accidents. Since July 2010, the Heidelberg broker specialists have also
been offering supplementary health cover on the model of property insurance for insureds in statutory health
insurance, thus extending their high-quality product portfolio.
The Gother Group
Gothaer Versicherungsbank VVaG
Cologne
100 %
Gothaer Finanzholding AG
Cologne
100 %
Gothaer
Allgemeine Versicherung AG
Cologne
100 %
50 %*
CG Car Garantie
Versicherungs-AG
Freiburg
Gothaer
Systems GmbH
Cologne
25,1 %
25,1 %*
ROLAND Rechtsschutz
Versicherungs-AG
Cologne
Polskie Towarzystwo
Ubezpieczeń S. A. (PTU)
Warsaw
77,13 %
25 %*
Aachener
Bausparkasse AG
Aachen
Gothaer
Lebensversicherung AG
Cologne
100 %
100 %
A.S.I.
Wirtschaftsberatung AG
Münster
Gothaer
Pensionskasse AG
Cologne
100 %
100 %
Gothaer
Asset-Management AG
Cologne
Gothaer
Krankenversicherung AG
Cologne
100 %
100 %
Gothaer
Invest- und FinanzService GmbH
Cologne
Asstel
Lebensversicherung AG
Cologne
100 %
100 %
Hamburg-KölnerVermögensverwaltungs GmbH
Cologne
Asstel
Sachversicherung AG
Cologne
100 %
100 %
GKC Gothaer
Kunden-Service-Center GmbH
Cologne
Asstel ProKunde
Versicherungskonzepte GmbH
Cologne
100 %
100 %
GSC Gothaer
Schaden-Service-Center GmbH
Berlin
10
0
%
Janitos Versicherung AG
Heidelberg
Gothaer
Risk-Management GmbH
Cologne
74,9 %
* Total Group interest
For purposes of clarity, some Group companiesare not shown or are not shown in their entirety.
Revised: January 2011
Group Annual Report for 2010 in accordance with
International Financial Reporting Standards
(IFRS)
Report for the Financial Year as of
1 January to 31 December 2010
Registered Office of the Company
Arnoldiplatz 1
50969 Cologne/Germany
Table of Contents
Table of Contents
Foreword
Letter from the Chairman of the Supervisory Board . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Letter from the Chief Executive Officer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
4
5
The Growth market Poland
– The Polish insurance market is one of the most attractive markets in Europe . . . . . . . . . . . . . . . . . . . . . . . .
– Gothaer and PTU resolve strategic further development of PTU until 2016 . . . . . . . . . . . . . . . . . . . . . . . . . . .
6
8
Solvency II – How the Gothaer Group is getting set for Solvency II . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
12
Demographic change – Interview with Michael Kurtenbach, Board member in charge of HR
on the challenges posed by demographic developments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
16
Management Report
General Economic Situation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Situation in the Insurance Industry . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Group Management Report . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Capital Management . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Segmental Performance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Non-Financial Performance Indicators . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Risk Report . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Outlook . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
22
23
27
34
37
42
43
65
Consolidated Financial Statements
Consolidated Statement of Financial Position . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Consolidated Statement of Comprehensive Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Statement of Changes in Equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Statement of Cash Flows . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Segmental Report . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
72
74
75
76
78
Notes to the Consolidated Financial Statements
Group Accounting Policies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Principles of Consolidation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Scope of Consolidation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accounting Policies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Notes to the Consolidated Statement of Financial Position – Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Notes to the Consolidated Statement of Financial Position – Equity and Liabilities . . . . . . . . . . . . . . . . . . . . . .
Notes to the Consolidated Statement of Comprehensive Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Corporate Governing Bodies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
– Representatives of Members . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
– Supervisory Board . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
– Management . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
– Advisory Board . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
– Directorships of Members of the Supervisory Board and Management . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
85
87
88
96
114
131
151
161
161
164
165
166
168
170
Auditor’s Report . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
178
Report of the Supervisory Board . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
179
Addresses of Major Group Companies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
181
Gothaer Group Annual Report 2010
3
Foreword
Profitable growth is vital,
… which is why this maxim remains a core component of the Future Initiative that Gothaer
further developed in 2010 and is the guiding principle behind what we do. This means,
of course, that the underwriting process is of special significance. Profitable growth also
means that we are on the look-out for new, attractive business fields, such as can be
seen in company health management systems and biometric risks, in the successes
scored in the area of renewable energies and in the acquisition of the Polish insurer PTU.
Another central item in Gothaer’s Future Initiative: Even more than in the past, customers
with their needs are very much to the fore in all Group activities. The discerning private
customer rightly expects competent and comprehensive advice, quick service and regular contact with his advisor on the spot. Business and corporate customers, too, have
similar requirements. Beyond this, it is also becoming more and more important to take
account of customers’ hybrid behaviour: The same customer may have different preferences in different buying situations. For instance, he may need personal advice by a field
force member one day, while asking for quick processing by e-mail the next.
Dr. Roland Schulz,
Chairman of the Supervisory Board
of the Gothaer Group
To meet these customer expectations, we need even greater networking of our Company
with the independent field force. This is because we are only able to offer our customers
a range of services at the highest level and meet the above requirements if we are aware
of our customers’ needs, expectations and priorities. We want satisfied customers, for
they are the ones who feel more loyalty to Gothaer and recommend our Company to
friends and associates. This is our goal: very satisfied customers who become “ambassadors” for our Company.
Here, I feel I must underscore the huge role played by employee satisfaction and performance: For we can only achieve our goals with staff who continue to be motivated, competent and performance-geared and who have internalized a service mentality and
always act with the customer in mind. Logically, the continuous support for talents, the
development of competencies and the creation of a high-performance culture are
important components in our personnel strategy. Enjoying work and success, and an
attitude that views change as an opportunity – that is what really matters!
The Supervisory Board wishes to thank the Executive Board and our staff very cordially
for their committed efforts and professional work.
Your
Dr. Roland Schulz
4
Foreword
We’re fit fo face the future,
… for we can look back to a successful year 2010 and, in difficult economic times, are also
able to draw on a fund of experience built up during our 190-year corporate history. In the
wake of the financial market crisis we succeeded in strengthening our financial base in
2010 and again improved our key balance-sheet ratios: At € 82 million, the
consolidated profit was 7.4 percent up on the previous year’s figure, equity was up 8.2
percent to €1.2 billion, and income from investments climbed to €822 million. In terms
of premium income, the Property/Casualty and Health segments advanced, whereas
Life, in view of a deliberate reduction in business with single premiums, was down. In
total, the Company posted gross premiums in an amount of €4 billion in 2010.
Dr. Werner Görg,
Chief Executive Officer of the
Gothaer Group
The acquisition of the Polish insurer Polskie Towarzystwo Ubezpieczeń S.A. – PTU for
short – launched the implementation of our growth strategy in Central and Eastern Europe. In 2010, Gothaer’s holding in PTU was still below 50 %, so that PTU is consolidated
for the 2010 financial year at equity, i.e. with the proportional equity capital. Starting in
2011, Gothaer now holds over 77.13 percent of the shares and 76.86 percent of the votes
in PTU. From 2011 on, therefore, PTU will be fully consolidated and integrated in the
Group financial statements. For the medium term we are planning to expand further into
other countries of Central and Eastern Europe and are watching these markets very
closely.
With a focus on credit bonds, Gothaer benefited quite substantially in the investment
area from good market developments during 2010 and, in nearly all investment classes,
made good the unrealized losses which had been caused by the financial crisis. Hence,
the result from investments of €822 million was significantly above the previous year’s
value of €655 million. In 2011 we are backing the tried and true: We are continuing to
concentrate our investments on those asset classes with stable current returns, and our
diversification within the available investment classes remains high.
On the following pages you will find detailed reports on the subjects we consider important: We will show how we are preparing for Solvency II, how we are strategically further
developing the Polish insurer PTU together with its management and staff, and how we
are taking a series of measures to cope with the impact of demographic developments.
We are prepared for the future – and that is what we want to show you.
The management would like to thank all staff for their unfailing commitment. I also wish
to express my appreciation to our marketing partners, customers, corporate governing
bodies and friends for their valuable support.
Your
Dr. Werner Görg
5
Growth market Poland and PTU‘s strategic alignment
The Polish
insurance market
is one of the most
attractive markets
in Europe
6
The Polish insurance market and the non-life insurer PTU
Attractiveness of the Polish insurance market
Poland, with its 38 million inhabitants is – alongside Russia and Ukraine – one of the
most populous countries in Central and Eastern Europe (CEE). Poland also is a major CEE
economy, with a gross domestic product of € 308 billion in 2009.
Poland‘s insurance market is one of the most attractive in Europe. Compared with other
countries in the European Union, the not-yet saturated Polish market offers a unique opportunity for benefiting from the high growth rates in the insurance sector and in Poland‘s
economy as a whole. Apart from these high growth rates a reliable legal system, the sound
currency and the cultural prox-imity to Germany combine to create a very good starting
base for a German insurer to invest there.
Poland‘s non-life insurance market
The premium volume of the Polish non-life insurance market as a whole amounted to approx. PLN 22.7 billion (approx. € 5.7 billion) in 2010. This makes Poland the second-largest
insurance market in CEE after Russia. In Poland, non-life insurance penetration stood at
1.9 % (EU15: 3.6 %) in 2009, and Poles were spending an average € 151 (EU15: € 997) on
insurance products.
The market is highly attractive. In the years 2006-2010, the non-life insurance market grew
by an annual average of 8.4 %. In 2010, despite what were still difficult underlying economic conditions in places, premium growth of 8 % was posted. The strongest premium
segment is motor insurance with roughly 56 % of the total (motor liability some 33 %).
Composite insurer PTU is one of the top providers
The composite insurer PTU was set up in 1990 and is thus one of the oldest Polish insurance companies and also one of the top providers on Poland’s insurance market.
The company offers private customers and small- to medium-sized Polish enterprises in
particular high-quality products and services via a nation-wide distribution network of
multiple agents.
In 2010, PTU achieved a rise in premiums of PLN 9.6 million – equivalent to € 2.4 million –
to PLN 451 million (€ 113 million). This makes PTU no. 12 on the non-life insurance market
with a 2 % market share. Most of the gross premium income (approx. 76 %) is accounted
for by the motor segment.
+2,2 %
441.4
451.0
2009
2010
Gross premiums written
in million zloty and annual
growth in %
7
“We want to develop
PTU into a competitive
and financially sound
top 10 insurer in
Poland.”
Dr. Werner Görg, CEO,
Gothaer Group
8
Gothaer and PTU resolve strategic further development of PTU
until 2016
Gothaer has held a qualified majority in the Polish insurer PTU since 2011. In our interview,
Dr Werner Görg and PTU Board chairman Olgierd Jatelnicki describe PTU‘s new strategic
alignment.
What strategic goals are behind the acquisition of the Polish non-life insurer PTU?
Görg: We now hold a 77 % share in PTU. With this acquisition we are pursuing several
goals: we wish to reduce our dependence on the saturated and increasingly overregulated
German insurance market and benefit from the high growth rates in Poland’s economy.
We are also strengthening our diversification from a risk-capital and rating angle and
enhancing the attractiveness of the Gothaer brand.
Jatelnicki: PTU will benefit from the fact that our own good understanding of market conditions in Poland is now bundled with the insurance expertise and support of one of the
most experienced insurers on the German market.
You have recently developed a new strategic for PTU until 2016 – what is the core
content?
Görg: Our joint goal is to exploit the growth opportunities offered by Poland’s insurance
market and to develop PTU into a competitive and financially sound top 10 insurer in
Poland. We want to increase the brand’s value perceptibly and make the company more
attractive for customers, brokers and staff. We will give PTU support both in financial
terms and with a comprehensive transfer of know-how, joining forces to offer Polish customers top insurance products and services. To this end, we will establish up two corporate divisions.
Please give us a brief outline of these divisions.
Jatelnicki: By mid-2012, retail business is to be optimally positioned with standardized
insurance products and lean, automated processes in one corporate division. Thanks to
a combination of specific insurance modules, the customer can mix and match the cover
that meets his individual needs. Using standardization, optimized processes and higher
automation, PTU will be able to offer its customers a much improved value-for-money ratio.
Core products in this corporate division are motor, householder’s and homeowner’s, accident and liability insurance. PTU will continue to focus on motor insurance but, in view
of the disproportionately high growth in other non-life segments, we are lowering our
dependence on motor insurance business, which is marked by intense competition. For
intermediaries, improved online connections in particular will make cooperation with PTU
faster, simpler and more attractive. Sales staff will be relieved in future of administrative
chores, leaving them more time for in-depth and high-quality customer care.
Starting in mid-2011, the second corporate division is to be built up. It will mainly address
corporate customers, a target group that needs individual insurance solutions tailored
9
to company size and sector. Advice and sales here are to be implemented via PTU’s own
corporate client consultants and specialized brokers.
What will change for PTU with the currently implemented capital increase?
Görg: The Gothaer Group is backing PTU with its financial strength as well. In this way,
PTU can insure higher risks and address larger corporate clients than was possible in the
past. With the current capital increase, the Gothaer Group will strengthen PTU’s financial
base with PLN 30 million, so that the company’s solvency requirements under supervisory
law are already exceeded.
What’s the state of the negotiations with the last outside shareholder, the Polish
Reinsurance Company (PTR)?
Görg: Representatives of Gothaer and Polish Re are collaborating well and on a basis of
confidence in PTU’s supervisory board. We are still in talks with this co-shareholder about
acquiring its shares. Since we already have a qualified majority in PTU we are not under
any pressure to come to a speedy conclusion. However, we are assuming that Gothaer
will wholly own PTU by the end of 2011.
Is PTU to remain Gothaer’s only foreign commitment or are you looking for further takeover
candidates?
PTU staff were informed
personally about
the new strategy.
10
Görg: Beyond this, we are still taking a systematic look at the most populous target markets in CEE countries, meaning Russia, Ukraine and Rumania. We will only make further
acquisitions if they help us achieve our goals: We are looking for markets that have growth
opportunities well above Germany’s; any acquisition must have perceptible and sustainable earnings and diversification effects for the Group in the medium term; target companies must also be a good fit in terms of strategy and culture. For Gothaer, profitable
growth has top priority – in business both at home and abroad.
“PTU will benefit
from Gothaer‘s
insurance expertise
and support.”
Olgierd Jatelnicki,
Board chairman at PTU
11
Solvency II
“I am a great advocate
of value- and risk-geared
corporate governance.
The Gothaer Group has
been managed along
these lines for years.”
Jürgen Meisch,
CFO in the Gothaer Group
12
Solvency II
How the Gothaer Group is getting set for Solvency II
The financial-market crisis and the insolvency of the US insurer AIG exacerbated the question of whether the present regulation of insurance companies in Europe is still appropriate and whether it is able to make insurers crisis-proof. To create a strong and uniform
Europe-wide insurance supervisory system, the EU Commission adopted the Solvency II
framework directive in 2009. It will be given a more specific form in further ordinances
and transposed into national law at the end of 2012. The introduction of Solvency II will
have considerable implications for the insurance industry.
The EU directive goes well beyond the previous regulatory requirements. The Solvency II
regime – like Basel II, the new supervisory system for banks – has a 3-pillar structure. It
is the provisions on insurance companies’ own funds that are in the focus of public interest. Further sections map risk management and market transparency. In addition, Solvency II aims at a reasonable harmonization of the supervisory systems in Europe. Once
the EU parliament and the EU finance ministers have given their consent, Solvency II is
set to be launched on 1 January 2013. So there is not much time left for insurers to get
ready to face the comprehensive changes. In Solvency II, a holistic solvency system is to
the fore. It ought to be able to prevent crises like the one just past. Hence, besides the
quantitative aspects – “How much capital is needed?” and “How much capital do I have?”
– there is also a stress on qualitative aspects. To assess one’s risks, an appropriate risk
management system is needed.
Here are the three pillars in an overview:
Pillar 1 deals with quantitative issues. It contains rules for the valuation of assets and
liabilities, and especially underwriting reserves and own funds actually held. The regulatory Solvency Capital Requirement (SCR) can be calculated either by applying a prescribed
standard formula or by using an internal model developed by the undertaking itself. The
Minimum Capital Requirement (MCR) refers to the regulatory lower limit for the solvency
capital that has to be held. It is the last threshold at which the regulator can intervene
before the undertaking’s authorization is withdrawn.
“The stipulations of
Solvency II are too
complex in their current
form and do not reflect
market requirements
sufficiently. Which is
why I am assuming that
Solvency II will be introduced as of 1 January
2013 in sections only.
For the rest, I think a
transition period of
four to six years
is reasonable,”
says Meisch.
Pillar 2 sets out the qualitative requirements for insurance undertakings and regulatory
authorities. Insurers must demonstrate that they have a risk strategy, an appropriate
organizational and operational structure, an internal management and control system
and an internal audit function. The principle of dual proportionality applies: the same
principles apply to all; but the way in which they are applied must be tailored to the undertaking’s business model in each case. The so-called Supervisory Review Process (SRP)
must also apply the principle of proportionality.
Pillar 3 deals with the requirements governing disclosure of information to both the public
and the supervisory authority. Under Solvency II, great importance is attached to qualitative statements, especially regarding the undertaking’s strategy, risk management and
use of the standardised or internal model. The quantitative solvency capital requirements
must be published. Any capital “add-ons” applied by the regulator must be included in
the publication.
13
Solvency II
Gothaer supported the roll-out of Solvency II from the beginning. Establishing the 2009
framework directive (Level 1 of three stages) was an important step toward a modern
supervisory system. The next step now is taking the implementation measures (Level 2),
whose publication is expected in mid-2011. Learning the lessons from the financial crisis
is a crucial factor in creating a supervisory framework for a stable insurance industry. One
especially critical factor as seen by the insurance industry is the scale and complexity
of future requirements. For one thing, introducing Solvency II is a very expensive item
for insurers. The measures must not be shaped in such a way that the costs exceed the
benefits. For another, there is a risk that high complexity leads to less comprehension.
In the financial crisis, the banks created ever more complex capital-market products,
undermining the system, until the crash came.
To assess the implications of the stipulations planned under Solvency II and to define
the current status of underwriting reserves, the Committee of European Insurance and
Occupational Pensions Supervisors (CEIOPS) carried out five Quantitative Impact Studies (QIS) from 2005 until 2010. Testing focused on the calculation methods for determining future capital requirements. The studies also addressed the valuation of assets
and liabilities to obtain a complete view of market value, pursuant to Solvency II. The
stipulations have been given concrete form in the process. Also tested were the disclosures to the supervisory authorities and the general public. Here, the insurance industry
was called upon to engage in a commentary, in which Gothaer, too, took part. In April
2011, the QIS5 results are to be published by the European Insurance and Occupational
Pensions Authority (EIOPA), the EU’s new insurance supervisory authority. It is already
“The biggest risk is that
the system is too complex, so that it won‘t be
accepted by the sector
and its employees.
A classic example of
too much in the way of
complexity is the financial crisis: The capital
markets created financial products of ever
greater complexity so
that, in the end, hardly
anyone understood
them. Since no-one
wanted to admit this,
the destructive effect
was able to unfold relatively unnoticed until
the markets collapsed,”
notes Meisch.
14
Solvency II
“It is in every insurer‘s
very own interest to
have dependable
control systems. We
have developed our
own model which we‘ve
been using successfully
for years now,”
says Meisch.
clear, however, that QIS 5 was not a successful dress rehearsal. The supervisory authority made too many mistakes – from test instructions published with delays all the way
to faulty result tables.
The Gothaer Group has deployed its own model
Having a system of one’s own has many advantages. Such a model maps the entrepreneurial decisions of the company concerned, like its product portfolio, customer structure
and special geographical features. Where the standard model only reflects the market
average, an internal model takes account of company-specific features. This can help effectively to control the overall risk. The model has been deployed at Gothaer for nearly 10
years now and is being steadily further developed. It enables risks to be identified more
quickly, so that early action can be taken. Likewise, capital requirements can be lower if
an internal model is used rather than the standard model. This rewards insurers deploying
a costly internal model for their ability to map their risk situation more precisely.
“Complexity for me is
the biggest risk driver.
The actual entrepreneurial task is to
reduce complexity. It is
important that the conclusions from a control
system are replicable
and comprehensible
for the employees and
sales staff affected.
Otherwise, the results
of Solvency II will not
be adequately translated into practice,”
notes Meisch
A clear avowal of value-driven corporate and group governance is unreservedly welcomed
by the Gothaer Group, too. Today already, the Company is being governed by the principle
of risk-adjusted capital allocation and by a duty to earn a required return. In all risk models, the clear merits of our Group structure and balanced business mix are clearly shown:
in times that are not easy for life insurers due to the interest rate, a profitable non-life
insurer generates result continuity.
15
Demographic change
“We took the right
measures very early on.
Our recipe for success:
forward-looking planning
and systematic,
sustainable action.”
Michael Kurtenbach, Board member in
charge of HR in the Gothaer Group
16
Demographic change
Interview with Michael Kurtenbach, Board member in charge of HR
on the challenges posed by demographic developments
At the end of 2010, Gothaer received the Corporate Health Award* in recognition of its
outstanding demography management, which also includes exemplary healthcare management. The jury praised Gothaer’s pioneering role in strategic personnel management, in maintaining staff health and in the advancement of female potentials. Why is
this subject so dear to you?
Demographic trends are a central theme for employers in Germany and translate into a
great need for action in personnel planning. It is becoming a crucial success factor for us
to have sufficiently qualified staff onboard also in the medium and long term. Which is
why we have been dealing in depth for several years already – and earlier than most other
insurance companies – with the various issues round and about demographics. Take
for instance the question of how we can boost our attractiveness as employer for young
professionals, or how we can increase the share of women in executive positions and
ease the return to work after maternal leave. The fact that we are also receiving external
praise for our comprehensive measures is very gratifying, of course, and shows yet again
that we’re on the right track.
* The Corporate Health Award is
a joint initiative mounted by
Handelsblatt, TÜV SÜD Life
Service and EuPD Research,
a market-research company.
Under the patronage of
Germany‘s Federal Ministry of
Labour and of the Initiative New
Quality of Work (INQA), the
annual Corporate Health
Award recognizes Germany‘s
“healthiest” companies.
How, exactly, then is the population changing? Are things really that dramatic?
If I may illustrate the situation using a few figures that reflect developments in Germany
between 2008 and 2060: According to the current population projection by the Federal
Statistical Office, the number of inhabitants in Germany will fall by 15 %-21 % – just at a
time when people are getting to be older and older. In 2060, one in three will be over 65.
The share of people of working age (20 to 64 years) will sink from 61 % to about 52-50 %.
These trends will have perceptible ramifications for the labour supply in the near future
already. A study by the Bertelsmann Foundation, for instance, shows that, in North RhineWestphalia, the number of 25- to 44-year-olds – meaning the age group that typically
supplies our junior specialists and executives – will be 13 % lower in 2015 already than
in 2006. These findings have vindicated us in our view that forward-looking planning and
systematic, sustainable action are necessary.
Now to Gothaer. How do you identify the need for action there?
To optimize resource planning and refine our analysis of the implications of demographic
trends for our employee structure, we have developed an analytical and forecasting tool
together with a consultancy firm – and were one of the first companies to do so. The tool
simulates the long-term impact of several scenarios. Proceeding from various planning
parameters, this enables us to forecast future developments in age structure, staff losses,
personnel levels and requirements. On this basis, demographic risks and opportunities
can be identified in a very refined manner – e.g. for specific job families, organizational
units or employee groups. We have established, for instance, that one job family of particular strategic importance has a disproportionately high average age, that more than
100 vacancies will have to be filled in one central department by 2020, and that a good
60 executives will be leaving us simply on retirement grounds between 2015 and 2020.
-13 %
2006
2015
Pronounced decrease in the
25- to 44-year-old age group
(source: study by the
Bertelsmann Foundation for
North Rhine-Westphalia)
17
Demographic change
To supplement the new analytical and forecasting tool that we use to examine collective
data, we deploy at individual level a Development and Succession Planning instrument
known for short by the German abbreviation ENP. In the past, the sole focus here was on
executive functions. However, since there are now signs of a shortage of skilled personnel
as well in the wake of the demographic trends, besides the executive staff shortfalls, the
spotlight within the scope of ENP will also be on specialist functions in future.
This means that you can capture in detail the need for action in demographics. Have you
made any headway already and do you have concrete measures?
“It will become a
crucial success factor
for us to have qualified
staff onboard in the
long term as well.”
Indeed we have. In recent years, we have been adopting packages of measures: Systematic junior-staff development and retention, for example, are of importance to us. This
being so, to counter the expected demography-related shortage of skilled personnel and
executives, we are operating very pinpointed talent management with dovetailed development programmes. The range starts with initial training, training at a professional
academy for Bachelor of Arts, and integrated studies pursuant to the “Cologne Model”.
It is continued via a two-year management start-up programme for university graduates
and a development programme for “Young Professionals” with executive potential. These
programmes have definitely proved their worth. The management start-up programme,
in particular, which is now in its third season already, is meeting with a very positive response both on the job applicant market and inside the Company. So that we can obtain
and retain even more young talents, we doubled the posts for the integrated studies
under the Cologne Model in 2010.
Within the context of present demographic trends, the systematic advancement of women
to fill management positions will become a critical success factor. Which is why it is
Gothaer’s aim to increase the share of women at all executive levels by 2016. For this we
adopted concrete target values as far back as 2006: Level 1: 15 %, Level 2: 20 % and Level
3: 40 %. Here, the focus is on three fields of action: First, the creation of structures and
processes to better detect the executive potential of female applicants and employees
upon recruitment and in personnel development. Second, we have already launched a
mentoring programme under which mentors see to the development of their mentees and
support them. Third, we are promoting the compatibility of family and career by offering
child care, flexible working hours, maintenance of contacts during maternity and parental
leave, and support for re-integration after a baby break. We are now able to report initial
successes. In the Gothaer Group’s core companies, we now have all of 18.4 % female
executives. Especially positive are developments at departmental-head level: here, the
share of women has nearly doubled since 2005.
One central challenge posed by demographic change involves making use of our experienced staff’s know-how and keeping this in the Company, while also creating development perspectives for younger staff members. This is where our “Senior Expert Model”
comes in. This approach was developed with the aim of creating new, attractive fields
of activity for experienced executives, while providing junior executives with access to
executive positions. With this in mind, we have pinpointedly identified fields of activity
18
Demographic change
“Especially in the
context of demographic
trends, the focus is
on the systematic advancement of women
in management. At
departmental-head
level, we‘ve already
been able to double
the share of women
since 2005.”
within which experienced managers can input their strengths without still being exposed
to the burdens of an executive function.
You are also known for taking measures in health promotion with measurable success
both for your own staff and as service provider for external companies. To what extent
does this subject flow into demography management?
Company health promotion is a firm component in our demography management. If we
are to be able to tackle today’s and tomorrow’s tasks in a networked and fast-moving
world, we need healthy and resilient employees who like doing their job well. Still, we
not only make high demands – we also do a lot in return: To promote staff well-being and
retain performance levels, workplace health promotion plays a central role at Gothaer.
We offer our staff a comprehensive package of measures for health promotion in the areas of ergonomics at the workplace, sports and movement, nutrition, stress, leadership,
addiction, medical offerings and workplace safety. Here, staff in all age groups have a
whole host of options for working actively on their health and fitness. What is striking
is that older employees in particular like to take up our workplace health services and
obtain good results in the process. That the investment in company health promotion is
worthwhile can also be shown in the positive development of the sickness absence rate
among GoFit course participants compared with the general workforce. Our healthcare
management has received several prizes – including the German Corporate Health Award
from the EU Commission.
Dr Markus A.W. Hoehner, CEO
EuPD Research, presents the
Corporate Health Award to
Thomas Barann, Head of HR.
19
Management Report
20
21
Management Report
General Economic Situation
General economic developments in 2010
The year under review saw a continuation of the global economic recovery that started
in the middle of 2009 and is being driven by the People’s Republic of China and other
emerging economies. Countries with an industrial sector geared to exports profited particularly from this development.
The global economic upswing and the resulting surge in demand for commodities made
for a significant rise in market prices. Crude oil was around 22 % more expensive at the
end of the year, copper more than 28 %, and the price of silver jumped by over 80 %.
Nevertheless, inflation remained low in the industrial economies. Production capacities
that were still under-utilized and wage pressure kept low by ongoing labour market tension in most industrial countries prevented a more vigorous upturn in the general level
of prices. So even the extraordinarily loose monetary policy of the central banks in 2010
presented no risk to price stability, particularly since commercial banks did not use the
liquidity available to increase the supply of credit on a massive scale.
Capital market developments in 2010
Apart from the recovery of the global economy, concern about the solvency of certain
eurozone countries played a role in shaping developments in the capital markets. That
concern was particularly instrumental in fuelling the pronounced risk aversion among
capital market participants that prompted a flight to US and core eurozone government
bonds and put sellers like Spain, Portugal, Ireland and Greece under pressure.
Against this backdrop, the yield of European 10-year benchmark bonds fell to a historical low during the course of the year. At the end of August, the government bonds yielded
2.1 %, which was approximately 1.3 percentage points lower than at the beginning of the
year. The yield of their counterparts in the United States fell from 3.8 % to 2.5 % over the
same period.
However, in the light of growing confidence in the economic upswing and because of
possible burdens on the eurozone countries to support the community currency, US and
core eurozone government bonds came under pressure again, as a result of which their
respective yields rose to 3.3 % and 3.0 % at the end of the year, 0.9 percentage points
higher than the annual lows registered in October and August.
The global economic recovery also made for a positive environment in the stock
markets. Share prices rose, especially in the second half of the year, after confidence in
a robust upswing strengthened. The S&P 500 closed 11.7 % up at year-end; the DAX 30
rose even more sharply, registering a 16 % surge over the course of the year that reflected
the German economy’s dynamic recovery in relation to others. Only the EuroStoxx 50
flagged under the impact of the debt crisis in the eurozone, ending 2010 around 6 %
down on the beginning of the year.
22
Management Report
Situation in the Insurance Industry
Developments in the insurance industry
The German insurance industry performed steadily through the financial and economic
crisis. The upward trends noted in 2009 continued through 2010. In the last financial
year, premium growth across the industry is expected to be 4.7 %. This is not due only
to the general economic recovery but also to the fact that confidence in the insurance
industry’s value proposition has not been dented by the crisis. According to the
German Insurance Association (GDV), this positive result was shaped largely by life
insurers – with another boost by single-premium business – and private health insurers.
However, the year under review was not such a success for property/casualty insurers.
Premium income in that field of business is expected to increase by only a moderate
margin of 0.7 %.
Property/casualty
Business in property/casualty insurance has been characterized for years by intense
price competition. What is more, the market for many lines is highly saturated and new
business potential is thus low. In principle, however, property/casualty insurance plays
a vital role in the coverage of private, commercial and industrial risks. The recessive
trend in premium revenues seems to have stopped. After 2009, premium income as
a whole is expected to increase moderately in 2010 (+0.7 % to € 55.1 billion). Set
against this upturn in premiums are increased claims expenses (+3.1 % to € 43.2 billion).
Here, comprehensive homeowner insurers in particular were hit by claims connected
with Hurricane Xynthia, the long period of frost and the flooding along the Neisse and
Spree rivers. The combined ratio across the market as a whole is expected to rise by an
estimated two percentage points to 98 %.
Premium income from motor insurance could increase by a moderate 0.6 % to € 20.2
billion in 2010 – the first such upturn registered in the space of five years. This should
thus mark the end of the ruinous competition seen in recent years. Claims expenses will
rise on balance to € 20.0 billion, which is 2.8 % more than in the prior year. Owing to the
long period of icy roads in December, there were significantly more motor liability incidents than in the previous year. The loss ratio for the financial year will show a further
rise from 97.0 % to 99 % and the combined ratio after run-off from 103.3 % to 107 %.
Motor insurers as a whole thus anticipate another negative underwriting result in the
financial year 2010.
In the property insurance lines, there was no continuation of the positive development
seen in recent years. While premium revenues are only expected to grow by 1.5 %
(PY: 2.6 %) to € 15.2 billion, claims expenses will rise sharply by 11.1 % (PY: – 1.6 %)
to € 11.3 billion. Accordingly, the combined ratio after run-off will move up from 92.5 %
to 99 %. On the claims side, private property insurers were particularly hit in the financial year 2010 by the impacts of Hurricane Xynthia, the long period of frost and summer
flooding.
23
Management Report
In general liability insurance, premium income has stagnated at around € 6.8 billion
since 2007. Because claims expenses were also virtually unchanged in the financial year
2010, the combined ratio is expected to remain at the prior-year level of 91 % and a
significant underwriting profit is thus again anticipated.
In personal accident insurance, a moderate rise in premium volume (+0.5 % to
€ 6.4 billion) is anticipated alongside a marked increase in claims expenses in the
financial year (4.0 % to € 3.0 billion). The latter is also a consequence of a harsh winter
with lots of accidents due to icy roads. The combined ratio is expected to climb from
79.3 % to 81 %.
Apart from finding themselves exposed to sustained high pressure of competition, marine
insurers were again hit by the effects of the financial crisis in 2010. Set against a
further fall in premium revenues (– 2.0 % to € 1.7 billion) is a stable volume of anticipated claims expenses for the financial year of € 1.1 billion. As a result, the combined
ratio after run-off is expected to rise to 100 % (PY: 98.1 %).
Owing to the improved economic situation and the absence of major insolvencies, claims
expenses for credit, surety and fidelity insurers are expected to fall sharply by – 40.0 %
(PY: +9.6 %) to € 0.6 billion. With premium income increasing at the same time by 8.0 %
to € 1.5 billion, the combined ratio after run-off should improve from 90.8 % to 56 %.
Life
In life insurance, the trend towards single-premium business observed since the financial and economic crisis continued through the year under review. The importance of
“conventional” life insurance contracts based on regular premium payment waned
further. The situation in Germany is thus falling increasingly into line with other European insurance markets.
With new regular premiums down by 2.7 % at € 5.66 billion and single premiums up
by 33.9 % at € 26.42 billion, premium revenues from new business increased by 25.5 %
to € 32.07 billion. Single-premium policies thus accounted for more than 80 % of all new
business.
Coupled with surrenders and conversions to paid-up policies, the still-high number
of contract maturities was more than offset by the increase in new single-premium business, so the gross premiums written by life insurance companies grew by 7.1 %, as compared with 6.6 % in the prior year. The percentage of gross premium income relating to
single premiums increased from 24.1 % to 30.0 %. The gross premiums written by the
pension trusts affiliated with the GDV decreased by 1.1 % and those of the pension funds
fell by 61.2 %. It should be noted, however, that pension trusts account for only around
3 % and pension funds less than 1 % of the premium volume registered by the life insurance industry as a whole. Overall, the premium income of life insurers, pension trusts
and pension funds rose by 6.0 % (PY: 7.1 %).
24
Management Report
In 2011, the GDV believes that life insurers’ products will remain attractive in competition with other forms of investment, boosted by demand for security. However, any
further expansion of single-premium business seems unlikely. A significant increase in
maturing premiums is anticipated, primarily due to policies concluded in 1999 ahead
of the tax debate that took place at that time. Under the premise of a moderate downturn in single-premium business, the GDV forecasts that premium volume will contract
in 2011 by 3.5 %.
In the case of pension trusts and pension funds classed as a form of life insurance, it is
also deemed unlikely that 2011 will produce any special developments that might cause
the premium income they generate to develop along different lines from life insurance
in the narrower sense. Although the possibility of a considerable volume of individual
transactions cannot be ruled out for pension funds, the GDV believes that life insurance
as a whole – including pension trusts and pension funds – will generate 3.5 % less premium income than in the year under review.
On the product side, the life insurance industry faces the prospect of radical change in
the wake of a series of current political decisions. The latest stipulations relating to the
maximum actuarial interest rate applied from 1 January 2012, the ruling of the European
Court of Justice (ECJ) on unisex tariffs and the rules introduced under the Solvency II
regime will all force companies to make adjustments to their present tariffs.
The recent ECJ ruling questions a fundamental principle of private insurance – namely
the principle of premiums being commensurate with benefits – because unisex tariffs
do not permit risk-based calculation. The possibility of gender-based calculation has
only been enshrined in EU legislation since 2004 and was explicitly incorporated into
German national law in the General Equal Treatment Act (AGG).
In view of the changes referred to above, the industry faces a challenging year. However,
growth is still crucially driven by private retirement planning and coverage of biometric
risks. Further growth potential exists in company pension schemes.
Health
The market for private health insurance and the prospects for its development are
crucially shaped by the framework of political and legal regulations in place. In terms
of health policy, 2010 was a very eventful year. Behind the acronyms GKV-FinG and
AMNOG, in particular, are a large number of new regulations affecting insureds in both
the public and private systems. From a political viewpoint, the results for the private
health insurance sector are mixed. Above all, the policy-makers essentially took no
action with regard to the competition-distorting supply of supplementary insurance policies by statutory health insurance institutes. Nor did they respond to private health
insurers’ hopes of receiving a separate negotiating mandate on medicinal products.
For the moment, however, the new regulations enacted last year are good news for those
who are privately insured or potentially new customers.
25
Management Report
The Federal Government implemented two major health reforms in 2010: the Statutory
Health Insurance Financing Act (GKV-FinG), which was approved by the Bundestag
on 12 November 2010 and entered into force at the beginning of this year, and the
Pharmaceutical Market Realignment Act (AMNOG).
Among the key changes introduced with the GKV-FinG was the lifting of the three-year
ban on employees switching to private insurance – a moratorium that private health insurers have long wanted repealed. The shortening of the qualifying period for switching
to private health insurance will enhance the market potential of private health insurance
from 2011 onwards.
The AMNOG, which also came into force on 1 January 2011, enables private patients to
profit from statutory manufacturers’ discounts in line with the rules in place for the statutory health insurance sector. In the past, those rules applied only to medication dispensed to persons covered by statutory health insurance schemes. The new discount
rules are likely to result in an appreciable reduction of expenses for pharmaceutical products, which have increased across the market in recent years.
As far as the development of business is concerned, private health insurance performed
soundly in 2010. After the number of persons with a comprehensive private health insurance policy increased by 44,500 to 8.86 million in the first half of 2010, the figure for the
year as a whole was forecast to grow by around 85,000 persons to 8.9 million. This would
be considerably fewer than the total of around 170,000 persons who joined the private
health sector in 2009. It should be noted, however, that the latter high figure was largely
due to the one-off effect of the obligation to take out health insurance that came into
force on 1 January 2009.
26
Management Report
Group Management Report
Business developments and position of the Group
Operating in a good economic environment, we built on the gratifying performance of the
prior year and further increased Group profit. However, insurance business continues to
be depressed by competitive pressure, the uncertain future prospects faced by many
citizens and the volatile nature of the legal environment.
Among the factors contributing to the satisfactory development of Group business was
higher income from investments. Including income from investments held for unit-linked
life insurance policies, this again totalled more than € 1 billion.
The development of premium income differed from one segment to another. Some
significant increases in premium volume were noted in the Property/Casualty and
Health segments. A restrictive underwriting policy was pursued in the Life segment. This
primarily affected single-premium business, which was thus recessive against the
market trend. Overall, Group premium income exceeded € 4 billion.
Policyholder benefits were on a par with the prior year, influenced partly by the good
investment result and consequent allocations to the reserve for premium refunds and
partly by higher property insurance claims expenses.
Thanks to continuing strict cost management, administrative expenses were lowered
again.
Premiums
Premiums written by our insurance companies totalled € 4.00 billion (PY: € 4.25 billion)
in the financial year 2010. Since discontinuing active reinsurance operations, we have
been almost exclusively engaged in primary insurance business. Here, written premiums decreased by € 251.7 million to € 3.95 billion.
That downturn was due to the decision to pursue a restrictive underwriting policy in the
Life segment, as a result of which premium income generated in the Life segment fell by
€ 322.7 million, notably because of shortfalls in single-premium business. The decline
in premium income can be partly compensated by performance in the Health and Property/Casualty segments. Our competitive value-for-money product range in the Health
segment produced € 56.8 million premium growth and a satisfactory increase of € 14.2
million was achieved in premium revenues in the Property/Casualty segment.
Reinsurance premiums assumed from insurers outside the Group amounted to € 55.2
million, which is € 6.0 million more than in the prior year.
27
Management Report
To determine the volume of net earned premiums, the reinsurance premiums ceded and
the savings components of unit-linked life insurance need to be deducted from the gross
premiums written. The change in net unearned premiums is also taken into account.
At € 3.25 billion, net earned premiums were also down on the prior-year figure of € 3.36
billion.
€ million
Breakdown by line of insurance
2010
2009
Automotive Liability
Comprehensive Homeowners
Comprehensive Householders
Fire
General Liability
Life*
Health*
Marine
Other Automotive
Other Lines of Insurance
Other Lines of Property Insurance
Personal Accident
211.1
119.3
94.1
65.9
311.5
1,524.0
830.3
40.4
119.7
218.8
249.9
162.4
221.1
122.6
94.7
63.8
323.8
1,847.0
773.5
40.7
114.3
188.4
250.0
159.5
Gross premiums written in primary business
3,947.7
4,199.4
55.2
49.2
4,002.9
4,248.6
Gross premiums written in assumed business
Total
* incl. premiums from the reserve for premium refunds
28
Management Report
Premium by segment in the financial year 2010
38.1 % Life
41.2 % Property/Casualty
20.7 % Health
Premium by segment in the financial year 2009
43.5 % Life
38.3 % Property/Casualty
18.2 % Health
€ million
Breakdown by region
2010
2009
Domestic
Foreign
3,863.7
84.0
4,135.9
63.5
Gross premiums written in primary business*
3,947.7
4,199.4
* Including premiums from the reserve for premium refunds
Our business has traditionally been concentrated in Germany. Over 97 % of premium
income from primary insurance business is generated in the domestic market. The
Group’s foreign business is confined largely to countries in the European Economic Area.
29
Management Report
Investments
Our investment policy is primarily geared to generating a robust and sustainable return
in a competitive environment. This is ensured by the systematic use of risk-adjusted
performance management aimed at optimizing the return/risk ratio of the investment
portfolio while taking account of our risk-bearing capacity. The tougher capitalization
rules anticipated under Solvency II already form a key basis for establishing prospective
required capital as well as the appropriate medium-term capitalization based on it.
Investment strategy is embedded in an asset liability management system and takes
account of the underwriting requirements that need to be met by investment income,
liquidity and security.
In 2010, we remained systematically committed to an investment policy geared to
stable, largely current income. The two priorities of this strategy are to generate attractive returns in the existing market environment and to ensure that risks are reduced
by being spread as broadly as possible over the different types of investment.
The financial markets performed very differently during the course of the year, with
varying impacts on profit. Yields in the bond markets reached new historical lows in the
period under review and did not stage a modest rally until Q4. Developments in the credit
and stock markets were also very diverse during the course of the year. The capital
markets were subject to marked fluctuations – a state of affairs reflected in the high
volatility of prices for stocks and bonds. Sustained losses in value due to the financial
and debt crises were written down. As the financial crisis waned and the sovereign debt
crisis loomed, the Company adhered to its existing investment policy in the year under
review. Partly in view of the prospective regulatory changes under Solvency II, no significant risk capital investment was made in shares, participations, alternative investments
or real estate.
The investment volume of the Gothaer Group totalled € 22.88 billion (PY: € 22.59 billion)
in the financial year 2010. Available-for-sale financial instruments, at € 11.09 billion
(PY: € 10.83 billion) accounted for almost half of all investments. A large proportion of
new investment was also in available-for-sale financial instruments in the year under
review. Developments were different in the areas of loans and held-to-maturity securities, where the portfolio contracted, basically as a result of maturities. While the carrying value of loans decreased by € 302.2 million to € 6.69 billion, the volume of held-tomaturity securities slid to € 2.17 billion from € 2.28 billion in the prior year.
Investment in shares in affiliated and associated companies essentially refers to shares
in companies which, due to lack of influence, need to be recognized at fair value as available-for-sale financial instruments. The carrying value of all investment increased by
€ 292.0 million to € 1.82 billion in the financial year. Other investments, boosted by an
increase in money on call, totalled € 0.93 billion (PY: € 0.79 billion). Investments carried
at fair value through profit or loss, which were again held to only a limited extent, included hedging transactions as well as embedded derivatives resulting from the separation of host and embedded components of hybrid securities.
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Management Report
Investment activities produced a profit of € 0.82 billion in the last financial year, which
was € 157.3 million more than in the prior year. The yield on investment improved
accordingly, from 3.0 % to 3.6 %. Sustained impairment due to the financial and debt
crises continued to be systematically written down in 2010. However, the volume of
depreciation was significantly reduced. In line with our investment strategy, with its focus
on stable current income, current interest earnings remained high in the year under
review, at € 0.80 billion (PY: € 0.85 billion).
Composition of the
investment portfolio
Financial year 2010
48.5 % Available for sale
29.3 % Loans
12.4 % Other investments
9.5 % Held to maturity
0.4 % At fair value through profit or loss
Financial year 2009
48.0 % Available for sale
31.0 % Loans
10.7 % Other investments
10.1 % Held to maturity
0.3 % At fair value through profit or loss
The carrying value of investments held to cover unit- or index-linked life insurance
policies increased by € 276.4 million to € 1.40 billion in the year under review. This
is another development reflecting the more relaxed situation in parts of the capital
markets. The change in value of these investments – € 191.9 million (PY: € 179.2 million)
– needs to be recognized in the statement of income. The total investment result,
including income from investments held for unit-linked life insurance policies, thus
improved from € 0.84 billion to € 1.01 billion.
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Management Report
Policyholder benefits
Policyholder benefits show any expense for insureds and other claimants by the insurance companies of the Gothaer Group. In addition to claims paid, this includes changes
in all underwriting reserves that the Group has formed to meet actual and potential customer claims. These changes involve, in particular, changes in the policy reserves and
reserves for premium refunds of the life and health insurance carriers as well as changes
in the loss reserves of the property and health insurers.
Gross benefits paid to customers by our insurance companies, at € 3.59 billion, were on
a par with the prior year. Because a larger share was assumed by reinsurers in 2010,
benefits net of reinsurance were moderately recessive at € 3.35 billion, down from € 3.38
billion in the prior year.
The volume of claims paid increased in all three segments. The upturn in the net account
was sharpest in the Life segment, where increased maturities pushed up the total by
€ 97.9 million. In the Property/Casualty segment, the increase of € 79.1 million was due
to a greater volume of major losses in fire and other property insurance lines.
In the Life and Health segments, allocations to reserves for premium refunds totalled
€ 157.5 million, back up from the € 114.9 million registered in the prior year. In view of the
sustained change in interest terms and increased solvency requirements for insurers,
the assumptions on which estimates in policyholder profit-sharing models are based
were adjusted in the year under review. This resulted in a € 27.0 million reduction in the
deferred reserve for premium refunds, which was recognized in income.
In the Life segment, the sum of € 479.3 million was allocated to policy reserves in 2010,
after an allocation of € 162.9 million in the prior year. This development was partly
shaped by the withdrawal from single-premium business. The allocation to policy
reserves in the Health segment, at € 205.8 million, was kept close to the figure
registered in the prior year (PY: € 209.7 million) by an ongoing excellent level of new
business and steady portfolio development.
Underwriting expenses
Gross underwriting expenses include all HR and material expenses incurred for the
acquisition and management of insurance policies. Acquisition expenses, which
comprise not only payments but also the change in deferred acquisition costs, showed
a moderate rise of € 5.2 million to € 316.9 million. Administrative expenses also fell,
from € 446.7 million to € 433.2 million, as a result of our rigorous cost reduction programmes. Total gross underwriting expenses thus amounted to € 750.1 million
(PY: € 758.4 million).
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Management Report
As a result of changes in our reinsurance arrangements in the Property/Casualty
segment, reinsurance commissions decreased sharply. The part of these expenses
assignable to reinsurers amounted to € 76.2 million in 2010, down from € 110.1 million
in the prior year. Overall, this resulted in increased net underwriting expenses of
€ 673.9 million (PY: € 648.3 million).
Consolidated profit
Adhering to our strategy of profit-oriented growth, we increased the consolidated profit
for the year again in 2010, to € 81.7 million after € 76.4 million in the prior year. The
operating result, boosted particularly by the marked improvement in investment income,
almost doubled to € 128.6 million (PY: € 67.0 million). Whereas special tax circumstances
meant that Group profit was significantly shaped by € 36.1 million tax income in the prior
year, the year under review saw it reduced again by tax expenses of € 16.2 million.
The net profit for the year attributable to minority interests amounted to € 9.3 million
(PY: € 1.6 million).
The return on equity, which is the ratio of consolidated profit for the year to average
equity exclusive of minority interests, stood at 7.4 % in the financial year, just below
the prior-year figure of 7.6 %. This was due to the fact that consolidated profit for the
year increased somewhat less sharply than revenue reserves and other reserves, which
were boosted respectively by undiminished good earnings and an increase in unrealized gains. Considering that these are difficult economic times, we can thus regard
the year under review as a successful one for the Gothaer Group.
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Management Report
Capital Management
For insurance groups, capitalization is a key variable or parameter for the assessment of
risk-bearing capacity and thus an important performance indicator. Capital management
enables us to ensure that adequate capital is always available to meet the operational
needs of our companies and achieve optimal deployment and use of funds within the
Group. This allows us to comply with legal provisions as well as with the requirements
of regulatory authorities, rating agencies, analysts and clients, all of which have become
significantly more exigent in recent years. Major constituents of capital management
within the Gothaer Group are risk-oriented controls and asset liability management
(ALM).
Capitalization
The equity of the Gothaer Group totalled € 1.23 billion (PY: € 1.10 billion) at the end of
the financial year 2010. As a mutual insurance association, the Gothaer Group has no
subscribed capital. We generate equity exclusively by retention of earnings. In addition
to the revenue reserves of the Group parent, Gothaer Versicherungsbank VVaG, the
equity shown in the consolidated financial statements also includes the earnings of
Group companies generated after initial consolidation. Also taken into account in the
equity of the Gothaer Group are unrealized gains and losses on investments available
for sale. Changes in equity are shown on page 75.
As well as Group equity, Gothaer capital management also covers so-called equity
surrogates. Equity surrogates include participation certificates issued by Gothaer as well
as subordinate liabilities. As of 31 December 2010, equity surrogates had an unchanged
carrying value of € 299.7 million.
Management of debt financing in the form of bonds and loans also forms part of capital
management. As of 31 December 2010, the carrying value of Gothaer Group bonds
and loans was also unchanged at € 187.6 million.
The debt ratio of the Group (defined as debt capital, i.e. bonds and loans including
non-eligible hybrid capital as a percentage of Group equity plus eligible hybrid capital)
was reduced from 16.0 % to 15.7 %.
Capitalization
€ million
Breakdown by type of capital
34
2010
2009
Equity
Equity surrogates
Participation certificates
Subordinate liabilities
Bonds and loans
1,225.5
1,098.2
35.0
264.7
187.6
35.0
264.7
187.6
Total
1,712.8
1,585.5
Management Report
Solvency
As the parent company of a German insurance group, Gothaer Versicherungsbank VVaG
is required to demonstrate to the Federal Financial Supervisory Authority (BaFin) that its
adjusted solvency is sufficient to meet the needs of the insurance activities of the Group.
Adjusted solvency is calculated by comparing the own funds derived from the equity
shown in the consolidated financial statements of the Gothaer Group (actual solvency)
to the need for capital resulting from the volume of business (plan solvency). At € 1.48
billion, the own funds of the Gothaer Group exceed the solvency margin required by
€ 500.3 million. This makes for a solvency ratio of 151.2 %.
As well as addressing the present requirements of the supervisory authority, we are
closely studying the future solvency requirements that will need to be met for compliance
with Solvency II. Risk models are computed and analyzed for this purpose and any
necessary capital measures taken in the course of risk controlling.
Rating
Rating agencies use insurer financial strength ratings to rate an insurance company’s
financial strength and, where applicable, an insurer’s capacity to meet its obligations in
connection with policies. The aim of our capital management is to ensure that we are
judged at all times to be a financially strong insurer. That goal has so far been successfully achieved. The international rating agency Standard & Poor’s gives the Gothaer
Group and its core companies Gothaer Allgemeine Versicherung AG, Gothaer Lebensversicherung AG and Gothaer Krankenversicherung AG an A– rating. The companies’ financial stability is rated “very good”. Gothaer Allgemeine Versicherung AG and Gothaer
Lebensversicherung AG are also given insurer financial strength ratings, which means
a “strong” rating for financial strength.
Risk-oriented control
The Gothaer Group takes a two-pronged approach to risk management. On the one hand,
we set out to minimize our risk capital requirements through highly advanced and integrated risk management. On the other hand, we focus on continually improving our capital base in order to increase our risk-bearing capacity. Gothaer strives for targeted,
equity-optimized growth.
With the help of value-oriented management indicators, such as RoRAC targets, which
are an intrinsic element of our incentive and compensation system, we set risk-oriented
objectives not only for the Group but also for the risk bearers.
Gothaer uses internally developed risk models to determine its particular risk position
and manage the rated risks. An early-warning system built into the internal risk models
is used to monitor a whole range of risk parameters and proximity to their threshold
values.
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Management Report
Asset liability management
Asset liability management (ALM) is another core constituent of capital management.
At the heart of strategic asset allocation for all insurance companies of the Gothaer
Group is the goal of keeping the share of net earnings accounted for by current income
at a constant high level and taking maximum advantage of scope for diversifying
investments.
Strategic asset allocation in the Gothaer Group is supported by various ALM techniques
(ALM analyses, Black-Litterman models, risk budgets) and vetted by the relevant bodies
(Investment Committee, Management, Supervisory Board). Asset allocation involves not
only taking account of ratios, sectors, currency and duration but also considering
stable-value concepts.
Asset allocation is verified on the basis of both market values and book values, naturally
taking account of all applicable restrictions on investments (section 54 of the German
Insurance Supervision Act (VAG), Investment Ordinance (AnlV), BaFin circulars). The risk
situation is reviewed regularly on a quarterly basis. This involves detailed presentation
of risk budgets on the basis of value at risk and shortfall probabilities with regard to
the attainment of net yield targets.
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Management Report
Segmental Performance
Gothaer Group activities are divided into segments reflecting Group and reporting
structure: Property/Casualty, Life, Health and Other Activities. Developments in these
segments are described below.
Property/Casualty segment
The Property/Casualty segment includes Gothaer Allgemeine Versicherung AG, Janitos
Versicherung AG, Asstel Sachversicherung AG and CG Car-Garantie Versicherungs-AG
as well as the Group parent Gothaer Versicherungsbank VVaG. As the largest property
insurer in the Gothaer Group, Gothaer Allgemeine Versicherung AG is responsible for all
significant lines and coverages in the area of property insurance, catering to the needs
of both private and commercial clients. Janitos Versicherung AG addresses the core target group of high-end private clients in property insurance. Asstel Sachversicherung AG
complements these operations with simple property insurance products for price-sensitive clients, mostly offered through direct marketing. CG Car-Garantie Versicherungs-AG
is a provider of motor repair and warranty insurance.
Performance in the
Property/Casualty
segment
Gross premium income in the Property/Casualty segment increased to € 1.65 billion
(PY: € 1.63 billion), upturns being registered in both direct and indirect business. Growth
was achieved particularly in other lines of insurance. With retention moderately higher
than in the prior year, net earned premiums in the segment rose significantly, by 3.1 %
to € 1.36 billion.
Investments for the Property/Casualty segment totalled € 3.88 billion at year-end, as
compared to € 3.82 billion in the prior year. Again, the lion’s share consisted of availablefor-sale financial instruments, which increased by € 74.7 million to € 1.15 billion. The
downturn in the investment result to € 188.1 million (PY: € 255.6 million) is essentially
due to the fact that less money was transferred by Gothaer Finanzholding AG to Gothaer
Versicherungsbank VVaG under the profit transfer agreement. Income from the disposal
of investments was also recessive. There were more market opportunities to take advantage of in the prior year.
Net policyholder benefits rose to € 928.2 million (PY: € 880.7 million), significantly
boosted by higher claims expenses due to an increased volume of major losses.
Total net underwriting expenses in the Property/Casualty segment rose by 10.3 %
to € 421.3 million. Administrative costs fell by € 4.9 million as a result of our ongoing
cost reduction programmes. Acquisition expenses, on the other hand, increased
because of lower retained reinsurance commissions in the wake of the revision of
reinsurance arrangements.
The developments described above brought down the Property/Casualty segment operating result to € 137.8 million (PY: € 244.7 million). Tax expenses decreased from € 33.3
million to € 4.5 million. The remaining net profit for the year amounted to € 118.6 million
(PY: € 196.8 million) in 2010 before transfer of profit.
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Management Report
The profit transfer agreement concluded with Gothaer Finanzholding AG by Gothaer
Allgemeine Versicherung AG and Asstel Sachversicherung AG resulted in a profit
transfer expense of € 52.6 million (PY: € 58.2 million) in the Property/Casualty segment
in 2010. This left a net profit for the year of € 66.0 million (PY: € 138.6 million) after
transfer of profit.
Life Segment
The Life segment includes the activities of Gothaer Lebensversicherung AG, Gothaer
Pensionskasse AG and Asstel Lebensversicherung AG. At the core of the business
activities of Gothaer Lebensversicherung AG is the direct and indirect provision of
all forms of life and annuity insurance as well as related supplementary insurance.
This also includes insurance investment products as well as occupational disability
and invalidity insurance. Gothaer Pensionskasse AG is a pioneer in Germany in the
field of intercompany pension schemes. It caters for companies that wish to operate
a promissory pension scheme for their employees through a pension trust. Asstel
Lebensversicherung AG is a direct marketer of high-performance, easily communicable
life and annuity insurance products.
Performance
in the Life segment
We made a conscious decision last year to pursue a restrictive underwriting policy in the
Life segment. This largely affected single-premium business, which decreased against
the market trend. New regular-premium business was also recessive, in line with the
market. Accordingly, premium income in the Life segment fell from € 1.85 billion in the
prior year to € 1.52 billion in the year under review. After deduction of reinsurance
premiums ceded and savings components, net earned premiums decreased to € 1.07
billion (PY: € 1.28 billion).
The carrying value of the Life segment investment portfolio changed only minimally in
the financial year, from € 15.22 billion to € 15.28 billion. Nearly half of all investment
continues to be in available-for-sale financial instruments. Investment activity generated income of € 610.9 million, which is significantly more than the prior-year figure
of € 491.5 million. This was essentially due to the fact that the volume of depreciation
decreased sharply in the financial year 2010 owing to write-downs being systematically
effected in earlier years for permanent impairment due to the financial and debt crises.
Policyholder benefits, which include both benefits paid and changes in underwriting
reserves, were moderately recessive in the financial year, down from € 1.74 billion in the
prior year at € 1.61 billion. While net benefits paid rose to € 1.28 billion (PY: € 1.18 billion),
the allocation to policy reserves decreased as a result of the withdrawal from singlepremium business.
In line with premium revenues, acquisition expenses fell back to € 125.1 million
(PY: € 137.6 million). As a result of our cost reduction measures, administrative expenses
were € 9.6 million lower than in the prior year at € 38.2 million. Overall, new underwriting expenses thus amounted to € 163.3 million (PY: € 185.4 million).
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Management Report
Owing to the developments described above, the Life segment registered an operating
profit of € 60.7 million (PY: – € 11.5 million). After allowance for financing expenses and
a tax expense of € 29.0 million (PY: € 22.3 million tax income), the statement of income
showed a net profit for the year of € 27.6 million (PY: € 6.7 million) prior to transfer of
profits. This significantly improved result was due to good investment income and
recessive net underwriting expenses.
Health segment
The Gothaer Group is represented in the Health segment exclusively by Gothaer
Krankenversicherung AG. Gothaer Krankenversicherung AG markets its products
primarily through the Gothaer field force. It also operates increasingly in the direct
insurance market. Our focus in the Health segment is on the steady implementation of
a strategy to offer high-performance, reasonably priced collective rates together with
company healthcare management and numerous services to companies and their
employees.
Performance in
the Health segment
Satisfying growth was noted in the Health segment in 2010. Gross premiums written
– excluding premiums from reserves for premium refunds – increased by 6.0 % to € 797.9
million. Because of our competitive product range, new business stabilized last year at
the high prior-year level. After allowance for withdrawals from reserves for premium
refunds, total gross premiums rose by 7.3 % to € 830.2 million. Owing to the still-low
percentage of premiums ceded to reinsurers, net earned premiums, at € 824.4 million
(PY: € 767.9 million), were again only marginally less than gross premiums written.
Together with an external provider, we have spent a number of years developing a new
portfolio and benefit management system that will set standards in the private health
insurance sector in terms of technical support. For example, it enables medical expert
systems for pharmacology, outpatient and dental treatment as well as hospital accounts
to be seamlessly integrated into the benefit management process. The new software
enables application and benefit management processes to be made significantly
more productive and efficient. Technologically, the modern Java system architecture
offers long-term investment safeguards and scalable system behaviour for all core health
insurance components and thus permits vigorous internal or external corporate growth.
Work on the new system progressed steadily in 2010, with the result that the realization
was largely completed in mid-December. After extensive testing, the new system will
go into first-stage production during the course of 2011.
The carrying value of the investment portfolio of the Health segment rose from € 4.46
billion to € 4.75 billion. This was the result of increased investment volume due to good
business performance. We systematically adhered to our existing investment policy,
which is geared to achieving robust and sustainable returns in a competitive environment. The result of investment activity improved to € 179.0 million (PY: € 135.9 million).
Particularly positive contributions to earnings were made by profits realized in the
context of tactical duration management in the area of promissory notes.
39
Management Report
Policyholder benefits increased to € 858.8 million (PY: € 801.8 million). At the same time,
the improvement in investment income resulted in an increased allocation to the
reserves for premium refunds. In addition, the greater volume of business entailed
higher claims expenses.
Net underwriting expenses for the financial year rose from € 78.2 million to € 87.5
million in the financial year. As a result of the high new business volume, acquisition
expenses increased by € 7.4 million to € 62.0 million. Administrative expenses totalled
€ 25.5 million, up on the € 23.6 million registered in the prior year.
Owing to the developments described above, the operating result increased
significantly, from € 15.9 million to € 45.0 million. After tax expenses of € 13.2 million
(PY: € 4.9 million), the net profit for the year in the Health segment rose sharply to
€ 31.8 million (PY: € 11.0 million).
Other Activities segment
Companies operating in the Other Activities segment include Gothaer Finanzholding
AG and the Group’s service providers. Gothaer Finanzholding AG, as the holding
company of the Gothaer Group, holds all the shares in the main insurance companies
and many other Group companies. As of the financial year 2004, the portfolio run-off
of the former Gothaer Rückversicherung AG is handled by Gothaer Finanzholding AG.
Gothaer Finanzholding AG is included in the Other Activities segment and not the
Property/Casualty segment because its primary function is as a holding company.
Among the main service providers are Gothaer Asset Management AG, which invests
and manages financial assets for Group companies and third parties.
Gothaer Systems GmbH is the Gothaer Group’s data centre and network operator
and a provider of other services in the area of information technology and software
programming, including applications development.
Other important services that are needed to maintain Group companies’ operations
are provided by Hamburg-Kölner-Vermögensverwaltung GmbH. The company purchases
office furnishings and supplies for Group companies, rents office space and performs
other services in the areas of facility management, company catering services, printing
and advertising.
Performance in the
The operations of Gothaer Finanzholding AG in the Other Activities segment consist
Other Activities segment exclusively of handling the residual insurance run-off of the former Gothaer Rückversicherung AG. Insurance business is thus of secondary importance in this segment.
Because the volume of loss reserves that needed to be reversed in the financial year
was lower than in the prior year, the underwriting result was a loss of – € 3.3 million
(PY: – € 1.1 million).
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Management Report
The carrying value of investments in the Other Activities segment totalled € 2.49 billion
(PY: € 2.02 billion), € 1.22 billion (PY: € 1.18 billion) of which related to the shares
held by Gothaer Finanzholding AG in all the insurance companies in the Group as
well as other participations. In line with the structure of the investment portfolio, the
investment result was shaped by income from these holdings – which amounted to
€ 119.5 million (PY: € 125.5 million) – either under profit transfer agreements or in the
form of dividend payouts. The overall investment result improved from € 124.5 million to
€ 169.5 million. Here, too, the more relaxed state of the financial markets had an impact.
The balance of other income and other expenses of the service providers in the
Gothaer Group stood at – € 17.9 million in the financial year (PY: – € 6.5 million). The
upturn was due to higher interest expenses resulting from a change in the scope of
consolidation. Without that change, the figure would have been on a par with the
prior year.
Due to the improved investment result, the operating result for the segment increased
from € 116.9 million to € 148.3 million. The profit transferred by Gothaer Finanzholding AG
to Group parent Gothaer Versicherungsbank VVaG totalled € 80.5 million in the financial
year (PY: € 121.0 million). The net profit for the year after transfer of profit thus improved
from – € 21.1 million to € 49.8 million.
41
Management Report
Non-Financial Performance Indicators
Employees
Qualified, motivated employees are crucially important for the success of an insurance
company. Hence the absolute priority assigned to personnel promotion and retention
in our HR operations. As well as financial performance incentives, we rely here
on targeted development and further training programmes. Promotion of women is
also naturally an element of our human resource management, as is company health
promotion.
Brand
A strong brand is a crucial success factor, especially for an insurance company.
The client’s decision to purchase an intangible commodity such as insurance is based
on trust, which is connected with a brand. So brands forge the bonds of customer
relations and customer loyalty. Gothaer launched campaigns at an early stage to support
the market positioning of its brand. Our core message is that we offer flexible products
and services beyond mere insurance and operate with the special attention to service
needed to deliver customised solutions for client problems. Gothaer thus addresses
the market with a finely formulated brand promise and projects a clear, coherent image
to the world. We also continue to drive forward the implementation of our positioning
within the Company.
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Management Report
Risk Report
Risk management principles
Risk-oriented
management concept
The core business of our Group companies involves assuming risk and making contractual commitments to pay claims or benefits. To be able to perform these tasks reliably
on a sustainable basis, Group governance is geared to the “safety first” principle and
the principles of value-oriented management. The framework of acceptable risks that
can be consciously assumed is delineated in our risk strategy. Risk tolerance, i.e. our
maximum permissible risk exposure, is defined by taking account of three requirements:
• From a regulatory perspective, minimum standards have been defined stipulating
that solvency capital requirements – including a security buffer against unplanned,
additional risks – are fulfilled at all times and that quarterly evidence is presented to
show that policy conditions can be met even in the event of adverse capital market
developments such as those simulated in Federal Financial Supervisory Authority
(BaFin) stress scenarios.
• From a rating perspective (financial strength rating), we seek to maintain a capital
adequacy ratio that, in conjunction with the other rating factors, is sufficient for at least
an A-category rating.
• A minimum security level of 99.5 % (one-year value at risk based on our own risk model)
is set for internal management purposes.
Risk management
organization
Risk management at the individual companies is part of the risk management system
of the Gothaer Group. Its functionality and efficacy is the responsibility of the entire
Management. The tasks of risk identification, analysis, management and monitoring are
for the most part performed close to risks in the operative units. Care is taken to ensure
that conflicts of interest in the performance of these tasks are avoided. Outsourced
functions are predominantly fulfilled by Group companies integrated in the Group-wide
risk management system. Responsibility for independent risk controlling is assumed
by the actuarial departments of the companies, supported by the Middle/Back Office
of Gothaer Asset Management AG and the central controlling unit at Gothaer Finanzholding AG.
The individual companies and Gothaer Asset Management AG are also represented in
the risk committee established at Group level. Its responsibilities include monitoring
risks from a Group perspective by means of an indicator-based early warning system
as well as further developing uniform cross-Group risk assessment and management
methods and processes. Risk management principles, methods, processes and responsibilities are documented in a risk manual and an Intranet risk management application.
Attention in the risk management process is focused on investment risks, underwriting
risks, loss of receivables risks in insurance operations, strategic and operational risks
and reputation and concentration risks.
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Management Report
The risk management process implemented operates an annual systematic inventory
of risks with half-yearly measures controlling, a qualitative and quantitative risk
assessment, various risk management measures, risk monitoring by the operative
units and risk controlling. The risk management system also includes an internal
monitoring system (IMS). Its purpose is to prevent or reveal damage to assets and to
ensure proper, reliable business activity and financial reporting. The IMS comprises both
organizational security measures such as access authorizations, use of the four-eyes
principle or proxy arrangements and process-integrated and cross-company controls.
The compliance function is decentralized, performed by various operative and Group
units. Regular risk reporting and ad hoc reports on specific developments make for
a transparent risk situation and provide pointers for targeted risk management.
The efficacy of the risk management system, the checks and balances and the
management and monitoring processes is regularly assessed by the Group internal
auditing unit. A review of the risk early-warning system is also part of the audit of the
financial statements performed by our auditors.
The Gothaer Group continued to work in the year under review to ensure that it meets
the risk management requirements set out in Section 64a of the German Insurance
Supervision Act (VAG). In doing so, we took due account of the stipulations of BaFin
Circular 3/2009 (MaRisk VA) setting out the minimum requirements for risk management
in insurance companies. We also monitored the development of the new Solvency II
supervisory regime, analyzing the pillar 1-3 requirements that need to be met for its
implementation at Group level and at the individual companies as part of a Group-wide
project designed to pave the way for coordinating implementation.
The Gothaer Group is working at both national and European level for a proper, competition-neutral set of new solvency rules.
Underwriting risks
As a general rule, the Gothaer Group companies counter underwriting risks with rates
based on actuarial principles and with underwriting guidelines commensurate with risk.
Compliance is systematically monitored through the use of controlling instruments and
early-warning systems that identify trends and negative developments in good time.
The adequacy of underwriting reserves is also subject to annual actuarial verification.
In addition, appropriate reinsurance treaties are in place to limit the risks arising from
major and accumulation losses.
For the individual Group segments, this means:
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Management Report
General risk situation
Our operations are differentiated by target group into private and corporate client business. Risks that could have a major or even existential impact on the Company’s net
assets, financial position and earnings are rated on the basis of scale of loss and probability of occurrence. Identified risk positions are analyzed, observed and actively
managed (e.g. by portfolio refurbishment). Limit systems, underwriting guidelines and
the exclusion of specific risks are used here as risk-minimizing tools. Risk reports
prepared several times a year keep executives and the Supervisory Board informed of the
current risk situation, changes in its makeup and any new or newly detected major risks.
Underwriting risks
We attach paramount importance to regular reviews of risk experience and adequacy
of underwriting provisions as tools of underwriting risk management. Both our tariffs
and our provisions are invariably calculated in accordance with actuarial principles.
Moreover, acceptance of underwriting risks is governed by a policy of risk-commensurate
underwriting that is documented in our underwriting guidelines. We are thus able to
guarantee the long-term fulfilment of our obligations. Owing to the use of planning
and management tools, we are in a position to identify unscheduled or hazardous portfolio and claims developments at an early stage and to address them with appropriate
measures.
Our risk portfolio in the private client segment is homogeneous. Nevertheless, we still
model the impacts of changing loss scenarios (e.g. accumulation losses) within the
framework of our internal risk model. Externally, our private client segment is exposed
to very high pressure of competition, which manifests itself in sustained pressure on
prices, high attrition rates, abundant supply and market saturation. We address this
market trend with product solutions that offer good value for money while still geared
to profit.
The corporate client segment is characterized by widely differing insured values and
risks. To enable us to manage those risks, we have strict underwriting guidelines in place
as well as authorization and competency rules that are finely tuned to the requirements
of the individual lines of insurance. In the case of special and particularly large risks,
we involve other insurers as risk partners or conclude facultative reinsurance treaties.
In the corporate client market, we increasingly see the same developments as in private
client business, particularly in terms of high competitive pressure on premiums and
conditions. We face this competition, having adjusted at an early stage with a profitgeared cyclical management system, responsible underwriting and premiums calculated
to be commensurate with risks. Professional supervision is provided to monitor the way
underwriting guidelines are applied and observed.
As in previous years, natural events resulting from climate change are expected to
play a significant role in shaping underwriting risk in the future. As a result, portfolio
monitoring and management are increasingly important and enable unprofitable risks
to be terminated for the protection of the insured community.
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Management Report
Reinsurance
In 2010, as in the prior year, an extensive stochastic-based optimization analysis was
conducted to assess the structure of our reinsurance operations and at the same time
review our exposure to natural catastrophes. The result was that the reinsurance structure in place on 1 January 2011 was largely retained. In addition, a so-called aggregate
XL cover was purchased to cover the annual net burden in the wake of prior existing reinsurance treaties and to encompass all lines of insurance except motor liability, general
liability and personal accident. The cover primarily affords protection from frequency
losses while also making for a significant reduction of the net risk capital requirement
or increase in the net return on investment. The renewal of reinsurance treaties was
marked by the fact that reinsurer capital rose to a record level in 2010, leading to overcapacities and thus price reductions in the face of largely unchanged demand.
Overall, we see a possible but very unlikely risk of a temporal mismatch between
primary insurance and reinsurance protection. This stems from the fact that negotiation
of a reinsurance treaty does not normally begin until the primary insurer has already
confirmed cover to policyholders. In the historically unprecedented event of a total
collapse of reinsurance capacities, e.g. in the case of a global financial crisis coinciding
with the occurrence of an extreme incidence of natural catastrophes, our risk exposure
would significantly increase.
We again succeeded in placing all contracts for moderately higher prices overall and
kept default risk within narrow limits through broad diversification in line with security
requirements. Default risk was defined – as in the prior year – with the help of an external stochastic tool.
As regards the concentration of insurance risks, we make a distinction between various
scenarios.
• Low frequency loss events involving major losses
This loss category reports major losses in the area of motor liability insurance because
a percentage of the policies in force were written on the basis of unlimited coverage or,
in the case of policies written after April 2005, with a limited but very high cover sum
of € 100 million. This potential liability is taken into account in our reinsurance treaties.
Major losses could also conceivably result from a terrorist attack. In the case of
high-coverage policies (insured sums in excess of € 25 million), terrorism is originally
excluded and the risk assumed by EXTREMUS Versicherungs-AG if the customer
requires insurance against terrorism. For risks where coverage is below the critical limit,
our reinsurance treaties provide limited but adequate reinsurance protection.
• Cross-segment loss events
This loss category primarily relates to natural hazard events that would cut across
Gothaer segments. These include, in descending order, flood, storm, earthquake and
– of significantly less importance (mostly motor own damage) – hail risks. Decisions on
the scope of reinsurance protection acquired are based on extensive analyses of our
entire portfolio. Those analyses are conducted by leading international reinsurance
brokers and carriers and are performed on the basis of renowned methods of
modelling exposure to natural catastrophes. The models in question include estimates
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Management Report
of probability of occurrence and assessments of recurrence intervals. The combined use
of RMS, EQECAT and AIR tools as well as reinsurers’ internal models provides us with
a secure basis for findings.
• Geographic or line-based concentration risks
Owing to the good geographic distribution of the Gothaer portfolio, geographic
concentration risk is negligible. Line-based concentration is perceptible only in engineering insurance for wind power facilities. Here too, precautions have been taken
against both accumulation and major losses through a combination of proportional and
non-proportional reinsurance protection.
• Risk dependency
Major loss events, in particular those which have a massive financial impact on the
reinsurance market, can lead to insolvencies on the part of reinsurers and thus result in
default. We seek to minimize the possible impacts on the Gothaer net account
by selecting our reinsurers with care (see loss of receivables risks) and spreading our
placements. In the case of natural hazard events in particular, it has been observed that
high losses translate into high claim payments fairly rapidly and therefore result in an
outflow of funds. By keeping the cash loss limits for our proportional treaties relatively
low and agreeing adequate reinstatements for non-proportional cessions, we have
made sure that Gothaer is not affected in such events by liquidity or reinsurance
capacity shortages.
In the coming year, a Dynamic Financial Analysis-based reinsurance analysis is planned
to show whether, considering balance sheet impacts, it may be a profitable move to
increase retention by making greater use of non-proportional reinsurance.
Claims
The following table shows the changes in Gothaer Allgemeine Versicherung AG loss
ratios and run-off results over the past 10 years across all fields of business and net
of reinsurance on the basis of IFRS.
Developments
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
as %
Loss ratio
after run-off
Run-off results
of initial reserves
68.3
76.9
63.8
59.3
64.3
59.8
66.9
59.5
65.6
66.8
8.9
1.3
2.5
5.4
– 2.3
4.5
0.9
10.0
3.3
6.4
A detailed year-by-year review of the run-off of our gross primary business by year
of occurrence, without allowance for annuity reserves, is provided in the notes to
the consolidated financial statements, in the section devoted to loss reserves.
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Management Report
Risks arising from
reinsurance assumed
Gothaer Allgemeine Versicherung AG acts as a reinsurer for a number of cooperation
partners. This activity predominantly involves small business and private client lines.
Terms are negotiated annually and are in line with current market conditions.
Risk management
methods in the
Property/Casualty
segment
• Forecast and change risk in the estimation of reserves
Wherever a model is used, there is a risk that actual results will deviate from projections.
In the case of reserves, however, underestimation needs to be avoided. To enable the
appropriateness of the IFRS reserve to be assessed, the variability of the estimate is
established by bootstrapping. This provides a basis for quantifying the certainty of the
IFRS reserve being enough to cover possible losses, expenses and annuity payments.
Factors that cannot be adequately assessed by the models used to calculate reserves
are taken into account separately as follows:
• individual major loss analysis: where necessary, individual major loss reserves are
included in the reserve calculation results
• detailed analysis of accumulation loss events, taking account of time of occurrence
and previous run-off and comparing them with such events in the past
• detailed analysis of sub-lines in areas where portfolio shifts have occurred.
• Natural catastrophe, accumulation loss and major loss risk
The effects of natural disasters, accumulation losses and major losses on the net side
for Gothaer are largely mitigated by the structure of reinsurance. To keep the impacts on
the gross side as low as possible, information delivered by ZÜRS, the zoning classification system developed by the GDV to identify exposure to natural hazards, as well as by
other models is taken into account in the determination of premiums and underwriting
policy.
• Reinsurance risk
Even a balanced reinsurance structure designed to mitigate the effects of extreme events
entails risk – the risk of possible default by reinsurers. At Gothaer, this risk is taken into
account in the selection of reinsurers (A rating) and is quantified by DFA modelling.
It is thus covered by risk management.
• Discounted reserve risk
If reserves are discounted, the choice of discount rate and the underlying payment
schedule are critical parameters. As loss reserves are not currently discounted – with
the exception of annuity reserves, which are of minor importance – this risk is irrelevant
in the Property/Casualty segment.
Against this backdrop, reserving policy can be described as adequate and appropriate.
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Management Report
Life segment
The general risk situation for life insurers is characterized by a sustained low level of
interest rates, the impacts of the financial market crisis and the emerging transition to
a phase of economic upswing. The risk-free interest rates of European government bonds
reached historical lows in 2010 but staged a moderate recovery in the last few months.
As a result of the financial market crisis, the markets showed signs of governments in
a number of European countries possibly presenting default risks. As employment
increased, growing demand finally started driving an economic upswing. Share prices
rose sharply. However, financial markets volatilities remained at a very high level, both
in shares and bonds.
One of the central issues for German life insurers is the lowering of the actuarial interest
rate by half a percentage point, from 2.25 % to 1.75 %, as of 1 January 2012. This rate
reduction, which applies only to new business, is a direct result of the sustained low
level of interest rates. The actuarial interest rate determines the guaranteed interest
applied in practice to the savings component of the insurance premium. Hence the term
“guaranteed interest” by which it is often referred to by members. What the Ministry of
Finance and supervisory authority BaFin seek to achieve by lowering the actuarial
interest rate is to restore a reasonable margin between attainable market interest and
the guaranteed interest promised to permit long-term fulfilment of these guarantees.
The attractiveness of new life insurance business will not be adversely affected,
however, because total benefit – the sum of actuarial interest and surplus bonus –
should remain at the same level.
At international level, work on the architecture of new regulatory regime Solvency II
continues. Headway is also being made in the debate on the revision of international
financial reporting standards for insurance contracts (IFRS 4). Both developments will
result in a more market-based view of liabilities and risks. We are monitoring these
developments closely and implementing appropriate projects to prepare for the future
changes in underlying conditions.
Legal risks could arise as a result of court decisions and more stringent regulation.
Gothaer Lebensversicherung AG and Asstel Lebensversicherung AG are not directly
affected by the latest rulings on the validity of instalment payment supplements or
by surrender value and acquisition cost clauses but there is a risk of supreme court judgments creating legal precedents in the future. The European Court of Justice (ECJ) recently
delivered a ruling on insurance contracts differentiated by gender that needs to be incorporated into German law by 21 December 2012. As of that date, gender-based insurance
contracts may no longer be placed on the European market because differentiation
according to sex infringes the rules prohibiting discrimination. Policies that already exist
are not affected by the ruling. At present, the impact on new Life segment business,
especially on rates, contract design and sales, is being analyzed.
If the debate on commissions spreads from the Health sector, life insurance products
and sales could be affected. Moreover, the disclosure and counselling rules currently in
place for insurance agents could be further tightened as a result of various initiatives
at European Union level.
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Management Report
Mortality tables
(biometric risks)
Policy reserves are calculated on the basis of decrement tables deemed adequate
by the supervisory authority and the German Association of Actuaries (DAV). Particular
importance here is attached to assessing longevity risk. In the estimation of the
Responsible Actuary, the current policy reserves provide sufficient safety margins for
the companies.
With regard to the (supplementary) occupational disability policy portfolio, the reviews
focus particularly on verifying that policy reserves are at least equal to the reference
reserve mandated by the Federal Financial Supervisory Authority (BaFin). Because
of the higher subjective risk, the (supplementary) occupational disability policy portfolio is analyzed on a regular basis. This shows that the bases for calculation currently
applied provide an adequate margin for safety. In response to the new precontractual
duty of disclosure rules introduced with the VVG reform, we rendered questions
in application forms more precisely and modified risk assessment for occupational
disability policies accordingly.
New bases for the calculation of reserves for (supplementary) long-term care annuity
policies were published by the DAV at the end of 2008. We have analyzed our
portfolios accordingly and see no risks at present. However, we will monitor the
portfolios continuously. If necessary, the policy reserves will be increased.
Assumptions of
cancellation probability
(cancellation risk)
Cancellation probability is not taken into account in the calculation of premiums
or underwriting reserves. In recent years, cancellation behaviour has tended to be
unremarkable. In 2010, the moderate increase in cancellations noted in the prior year
was brought to a halt, producing a lapse rate lower than the market average. The
measures taken to prevent cancellations are being maintained and cancellation figures
critically monitored. There is also a risk of increased liquidity being required for the
cancellation of major contracts, which could force us to realize hidden liabilities in the
current capital market situation. We counter this risk with selective key account
management for major clients.
Interest rate
guarantee risk
Because of the phase of low interest rates and the volatility of bond and stock markets,
the German life insurance industry – and thus also Gothaer– may be exposed to risks
inherent in high interest rate guarantees, which generally extend over several decades
in the case of life insurance products.
The maximum actuarial interest rate since 1 January 2007 has been 2.25 %. Despite this
downturn, the unchangeable nature of figures guaranteed in policies in force results in
inertia in the reduction of this risk. The average actuarial interest rate for policies in force
is between 3.1 % and 3.4 %. In 2010, the yield of ten-year Bunds moved down from nearly
3.40 % at the beginning of the year to a historical low of 2.11 % in Q3 and back up to
3.00 % at year-end. Both the average portfolio coupon at the end of 2010 and the yield
achieved by diversified investment in new fixed-interest securities in 2010 were
higher than average actuarial interest. Under current accounting rules and the regulatory
rules for determining reserves, it may become necessary to increase reserves in the
coming years if interest rates remain low. The anticipated need for higher reserves is due
to the amendment of the Policy Reserve Ordinance on 1 March 2011; its accrual will
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Management Report
be spread over the next few years. We make a point of ensuring that investments are
aligned with liability deadlines and thus tailored to the risk-bearing capacity of the
Company. Priority is assigned here to generating a stable long-term flow of income.
Risk management
methods in the Life
segment
Risks associated with life insurance policies stem mainly from the guarantee of the basic
data used to calculate premiums (for interest, biometrics and costs) and the surrender
values over the whole term of the policy. Since it is generally not possible to adjust life
insurance premiums at a later date, these risks are all lessened by appropriate safety
margins in the bases for calculations.
Gothaer employs a variety of instruments to establish the nature and extent of risks arising from life insurance policies. The main risk connected with a life insurance policy is
interest rate guarantee risk, which increases in low interest rate phases in particular.
The acceptability and financeability of Gothaer’s interest rate guarantees are verified by
application of the two DAV models “Verification of Actuarial Interest for Life Insurance
Portfolios” and “Risk Assessment of Long-term Guarantees”, the GDV model used to
determine the viability of future actuarial interest rates, our own model for determining
the maximum actuarial interest rate that can be financed as well as ALM analyses, the
models of the QIS5 Solvency II impact study and our internal capital requirement model.
In the case of unit-linked life policies, there is no interest rate guarantee risk – except for
guaranteed annuity factors – for the period of annuity of unit-linked annuity insurance
or other explicit supplementary guarantees, e.g. recovery of premium.
Other risks associated with life insurance policies result from adverse changes in
mortality, longevity, invalidity and expenses as well as from a change in cancellation
behaviour. These risks are reduced, amongst other things, by appropriate reinsurance
treaties and maximized reserving at the level of guaranteed surrender values. The extent of Gothaer’s exposure to these risks is established using traditional embedded
value sensitivity analyses and Solvency II QIS5 impact study stress scenarios. Changes
in cancellation and changes in expenses have the greatest impact here. The adequacy
of cost and biometric assumptions is also regularly verified in the course of profit source
analysis.
Gothaer life insurance policies are mostly long-term contracts with discretionary surplus
bonuses. Owing to the conservative selection of the bases of calculation, surpluses are
generated which are shared with members. Surplus bonuses can be adjusted, subject
to the minimum bonus for members required under supervisory regulations. Because
of this adjustment option, the impact of a change in the risk, cost or interest situation on
life insurers’ income is limited.
However, all the analyses cited confirm the financeability and acceptability of the risks
identified here for Gothaer.
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Management Report
Health segment
The market and prospects of development for private health insurance are defined
to a large extent by the political and legal regulatory environment. The Act to Enhance
Competition in Statutory Health Insurance (GKV-WSG), in particular, made an incision in
the private comprehensive insurance business model. Since 2009, for example, it has
been easier for new customers in comprehensive health insurance to change insurers
and have part of the ageing reserve formed for them transferred to the new insurer.
This results, on the one hand, in greater portfolio volatility – also in terms of risks – and,
on the other, in higher premiums for financing the facility to change insurers.
The social safeguard mechanisms of the basic tariff, the generous rules for persons
formerly not insured and emergency treatment even for non-payers has to be borne by
everyone with a comprehensive private health insurance policy. This makes for higher
premiums, in both portfolio and new business.
However, the repeal of the 3-year moratorium on the ceiling for compulsory statutory
health insurance heralded by the Statutory Health Insurance Financing Act (GKV-FinG)
offers new prospects of growth in our core field of business, comprehensive insurance
– especially in the white-collar target group. Last year, for example, we managed
to achieve organic growth in that segment as a result of favourable competitive
positioning.
The growth prospects for supplementary insurance also remain good. The challenge
for companies is to adjust appropriately in terms of sales channels, cooperations and
administrative processes.
Owing to the ongoing difficulties in the capital markets – which are currently marked by
very low interest rates for safe investments – the earnings situation is deteriorating.
And because a large portion of the recessive profits from investment drive down the
allocation to reserves for premium refunds and thus ultimately affect insureds, significantly higher insurance premiums need to be paid in some instances. The increased
premium adjustments seen both at Gothaer and in parts of the market are increasingly
resulting in acceptance problems among customers and distributors.
Underwriting risks
Underwriting risks include risks that arise from the composition of portfolios and from
premiums that are not commensurate with risks. The risks mentioned have a major
bearing on the ability to allocate adequate reserves for premium refunds and thus
have the funds available to lessen the impact of the development of premiums for our
customers. A particularly important role is played here by the recurrent financing of
annually granted premium limits.
We continue to counter these risks with rates based on actuarial principles, selective
underwriting and professional benefit and health management as well as by the use
of controlling tools and early-warning systems. The adequacy of loss reserves remains
subject to regular actuarial verification. In view of the composition of our portfolios, attention is particularly focused on the introduction of the basic tariff and the anticipated
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Management Report
increase in switches from one private insurer to another as a result of the prorata portability of ageing reserves. To keep the reserve for premium refunds at an acceptable level
despite adverse conditions, it was again necessary to modify the premium refunds
for claim-free clients, which will result in a further reduced financial requirement.
The adjustment was made in such a way that no rise in benefit claims behaviour is
anticipated. The tariff bonus – a premium limit re-set each year for parts of our comprehensive insurance portfolio – was also reduced at an accelerated rate with a moderately
revised adjustment aimed at easing the pressure on reserves for premium refunds.
Premiums from new business are based on mortality rates that are in line with the
latest private health insurance mortality tables. The cancellation probability factors
applied are based on our own duration-dependent hospitalization studies as well as
association experience. The actuarial interest rate, one of the most important bases for
calculation in private health insurance, is dependent upon developments in the capital
markets. This fact is taken into account through the use of professional tools for analyzing investments and harnessing the findings for a more focused investment strategy
as well as by the regular performance of stress tests and extrapolations. In view of
developments in the capital markets, however, the chance that the net target yield will
not be achieved is still elevated. Investment strategy is therefore focused on a reasonable risk-return ratio coupled with a high probability of guaranteed actuarial interest
being achieved. From the present vantage, there is no reason to expect a reduction in
actuarial interest in 2012.
Financial risks in the area of health insurance can result from the occurrence of major
and accumulation losses. These risks are taken into account by a comprehensive reinsurance policy.
The European Court of Justice (ECJ) recently delivered a ruling on insurance contracts
differentiated by gender that is required to be transposed into German law by 21 December 2012. As of that date, gender-based insurance contracts may no longer be placed
on the European market because differentiation according to sex infringes the rules
prohibiting discrimination. Policies that already exist are not affected by the ruling.
Under these premises, it will be important for private health insurers to be able to adjust
policies already in force. This is needed to avoid tariff duplication and distortion for
policyholders switching between unisex and other tariffs. The impact on new Health
segment business, especially on rates, contract design and sales, is currently being
analyzed.
Risk management
methods in the Health
segment
• Portfolio composition, premiums not commensurate with risks, allocations to reserves
for premium refunds, recurrent financing of premium limits granted annually
We address this area of risk with professional underwriting, professional benefit
and healthcare management and other controlling instruments that make trends and
negative developments visible in good time. Incongruities can be promptly evened out
by annual comparison of the insurance benefits calculated and actually required, which
triggers an adjustment of premiums in the event of significant variance (premium
adjustment clause). With regard to portfolio composition, special consideration is also
given to the new basic tariff.
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Management Report
Extensive sensitivity analyses are carried out in connection with annual financial
projections in order to examine the impact on the reserve for premium refunds and
the financing of premium limits granted annually. Apart from the basic scenario reflecting
the Company’s expectations, a variety of alternative scenarios are also examined.
The alternative scenarios include, among other things, modified assumptions about benefit claims and new business. Attention here focuses not only on changes in individual
assumptions but also on combinations of modified assumptions. So-called worst case
scenarios are among those reviewed in this connection.
In order to test the sensitivity of the main indicators against the individual parameters,
the results of the alternative scenarios are compared with those of the basic scenario.
In addition, sensitivity analyses make it possible to portray the entire range of possible
ramifications for the Company and take early action to counter undesirable developments.
In the Health segment, reserving also needs to conform to the principle of prospective
unlocking. Where premium adjustments are triggered as a result of changes in the bases
of calculation, the assumptions made calculating underwriting reserves also need to
be adjusted. Against this backdrop and given the controlling instruments described,
reserving policy is adequate and appropriate.
• Cancellation probability
The above-mentioned sensitivity analyses are also used to evaluate exposure to cancellation probability risk. They can be used to examine the impact of a reduction in cancellations, for example, or to study the prorata portability of ageing reserves anticipated
in the wake of the healthcare reform. In the event of identifiable endangerment of key
financial ratios, countermeasures are taken, such as lowering the cancellation probability used in the calculations.
• Mortality rates
Sensitivity analyses based on various mortality tables as well as on the Company’s
latest actual mortality figures are performed to evaluate the mortality rate risk. The
mortality figures used to calculate premiums are chosen so that a sufficient safety
margin is ensured even after allowance for mortality trends.
As in the case of insurance benefits, a change in the law in 2008 allowed changes in
mortality to trigger premium adjustments and thus promptly eliminate any imbalance
between actual and calculated figures.
• Actuarial interest
Actuarial interest rate risk is addressed at the investment level with professional analytical tools and the results obtained are systematically harnessed to optimize investment
strategy. The focus of investment activities is on achieving a secure current average yield.
This also applies to the “actuarial company yield” (Aktuarieller Unternehmenszins, AVZ),
an actuarial interest verification procedure developed by the DAV that is carried out
annually by Gothaer. The yield in investments is also regularly subjected to stress tests
and extrapolations as well as stochastic sensitivity analyses.
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Management Report
• Major and accumulation losses
Exposure to major and accumulation loss risk in the area of health insurance is
managed by a comprehensive reinsurance strategy tailored to the specific requirements
of the Company. The adequacy of insurance protection is reviewed quarterly on the basis
of detailed reinsurance accounts, after which appropriate adjustments are made as
required.
Loss of receivables risks
For Gothaer Krankenversicherung AG, loss of receivables risk acquired a new significance
in 2009 because of the issue of non-payers, which affects the entire private health
insurance sector. Whereas under the old law non-payment of premium constituted
grounds for contract termination by the insurer, the GKV-WSG no longer allows that
sanction option in comprehensive insurance. Instead, the insurer can suspend benefit,
i.e. pay benefit only for emergency healthcare as defined in the Act. To cover the anticipated loss of receivables, an extensive programme of measures has been drafted and
adequate provision has been made by significantly increasing the reserve for bad debt.
Accounts receivable from policyholders and insurance agents in connection with direct
written insurance business at Gothaer Allgemeine Versicherung AG, Gothaer Lebensversicherung AG, Gothaer Krankenversicherung AG and Asstel Lebensversicherung AG
totalled € 197.6 million at balance sheet date. This figure includes valuation allowances
that take adequate account of the risk of possible loss of receivables. The following table
shows the age structure of the receivables handled by our central collection systems.
Outstanding receivables
Outstanding for more than
90 days
180 days
360 days
€ million
102.6
72.3
38.1
The average collection loss (unsuccessful court orders) in the last three years was
€ 4.6 million, which represented an average of 1.4‰ of gross premiums written.
We cede reinsurance only to first-class reinsurers. 52 % of the reinsurance premiums
of Gothaer Allgemeine Versicherung AG are ceded to reinsurers with a rating of AA –
or better. Accounts receivable in connection with reinsurance business totalled
€ 38.2 million at balance sheet date. Accounts receivable in connection with reinsurance
ceded amounted to € 32.5 million. The structure of receivables from reinsurers by rating
class was as follows:
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Management Report
Receivables on assumed
reinsurance business
Breakdown by rating category
AAA
AA
A
BBB
€ million
0.2
12.9
12.1
5.9
Companies with no rating accounted for € 1.4 million of accounts receivable from
reinsurers. As a result of our security policy, loss of receivables in past years has been
insignificant.
Investment risks
The investment portfolio is designed to meet all of the Gothaer Group’s current and
future payment obligations. The risks associated with it are limited by systematic
compliance with regulatory requirements (e.g. BaFin stress tests), which are seen only
as minimum risk management requirements, and with the use of modern controlling
systems. All major investment risks are identified, measured, monitored, reported and
managed within the context of risk management. To improve its risk/earnings ratio,
the Gothaer Group attaches a great deal of importance to diversification of investment
in terms of mix and spread.
The prime focus of this investment management is risk-bearing capacity, which is
established on the basis of internal models and asset liability management (ALM). The
wide range of ALM concepts employed at Gothaer includes stochastic risk models such
as ALM projections, asset-only analyses as a module of the early-warning system within
the Group as well as stochastic support for net target yield and surplus statement
planning. These analyses from different perspectives form the basis for the regular
verification and adjustment of strategic asset allocation.
In addition, key business ratios are analyzed with the help of empirical distributions and
shortfall probabilities. These ratios show, among other things, net and market value
yield, hidden asset-side net reserves, uncommitted reserves for premium refunds and
the own funds ratio. Regularly defined individual scenarios are also examined. The basis
is formed by a scenario that is deemed highly likely to occur. Furthermore, analysis
is extended to critical scenarios that are identified in the course of the stochastic
evaluation of results.
Stochastic indicator-based risk measurements are also used to establish probabilities
of failure to achieve investment result targets at the end of the year. The probabilities are
the result of a simulation of market value development and earnings generated by the
major investment classes based on the Group’s own performance expectations for the
year ahead. Other models such as our own capital requirement model or the QIS study
models for Solvency II are also used.
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Management Report
Systematic further development of the risk models used also promotes a sustainable
increase in risk-bearing capacity. In addition to risk restrictions required by the supervisory authority, special investment guidelines (compliance) are applied to monitor
internal risk limits.
The following three types of risk are monitored and managed within the investment
management system described.
Market change risks
Market change risk is the risk of financial loss due to changes in market prices. Market
change risk can be influenced, for example, by changes in prices, spreads, volatilities,
correlations or even illiquidity in the market. Market change risk management is
supported by regular computations based on the use of stochastic and deterministic
models. Sensitivity analyses are developed to measure risk potential. The investment
portfolio, which is particularly susceptible to market change risk, is also subjected
to stress scenarios. The results of the individual sensitivity analyses are shown in the
Stress Scenario Impacts on Equity table.
• Interest change risk
Interest change risk is the risk of a change in the risk-free interest rate and any consequent negative impacts on the market value of interest-bearing instruments. As a result
of systematic gearing to asset liability management, market value is ensured by the fact
that interest change risks for the Gothaer Group are primarily viewed against the backdrop of the life of liability-side obligations. The resulting asset-side curb on the interest
change limit is reflected in the internal (target) limits for duration. Another tool used is
tactical duration management, which allows portfolio management – within a defined
context – to exploit short-term opportunities arising from changes in interest rates.
Interest change risk is measured, reported and managed by Risk Controlling in the form
of modified duration calculations performed on portfolios and individual securities
within the framework of internal duration reporting.
• Reinvestment risk
When interest rates fall, there is a risk that funds can only be reinvested at a lower rate
of interest. Gothaer limits this reinvestment risk by the use of ALM and duration analyses. In ALM analyses, reinvestment risk is taken into account in the stochastic models.
Possible impacts can be identified in the attainment probabilities of the target variables
(e.g. net yield, solvency). Gothaer counters reinvestment risk by active portfolio
management. The primary focus here is on careful selection of the maturity structure
of the bond portfolio, which is managed by taking into account derivatives, interest
structures and quantitative approaches (e.g. trend-following models).
• Price risk
Price risk is the risk of market value being lost as a result of adverse changes in share,
stake, hedge fund and property prices. Price risk management involves, amongst other
things, continuous intensive observation of concentrations at industry, regional and
issuer level. It also involves limiting and monitoring exposure in the individual asset
classes on the basis of internal (target) limits which reflect the results of the annual ALM
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Management Report
analyses and which, when observed, guarantee the risk-bearing capacity of the Company. Asset classes exposed to a heightened price risk are not only subjected to sensitivity analysis; they are also monitored in stress tests.
For unexpected developments, individual company hedging concepts (e.g. share
options) can be implemented to ensure a risk-adequate response to short-term fluctuations and, in extreme cases, limitation of the losses that occur. These hedging concepts
are constantly reviewed in the light of market developments and adjusted as required.
Because of the minimal volume of the share portfolio, share price risk was negligible
in the Gothaer Group at balance sheet date.
In the property sector, market values show a moderate recovery, heralding a return to
normal after the crisis years. Accordingly, net asset values moved increasingly in line
with the model values produced by discounted cash flow analysis. Value adjustments
needed to be made only in a few special instances. In the coming year, negative earnings contributions cannot be ruled out for individual cases. Having said that, this asset
class also has the greatest value appreciation potential. Especially in view of long terms,
relatively low marketability and existing commitments, our engagement in this asset
class is long-term.
• Exchange rate risk
Exchange rate risk is the risk presented by adverse changes in currency exchange rates.
The existing exchange rate risk is almost entirely hedged at company level by foreign
exchange forward contracts. Hedging is performed in a rolling programme for each
currency. The following chart shows exposure per currency in euros and the relevant
market value in foreign currency at the end of the year. Set against the latter but not
shown in the table are more or less equal volumes of foreign exchange forward contracts
concluded as hedges.
€ million
Breakdown by foreign currency
Market values in €
US dollar
Pound sterling
Danish kroner
Polish zloty
Swiss franc
Other currencies
Market values
in nominal currency
2010
2009
2010
2009
1,572.8
253.6
194.1
39.7
8.3
23.2
673.8
263.3
0.0
0.0
4.4
14.2
2,102.1
271.4
1,446.4
157.2
10.4
various
1,100.6
234.0
0.0
0.0
6.6
various
Considering the hedges in place, a change of 1 % in the individual exchange rates
would thus result in only insignificant changes in the market values of the aggregate
foreign currency positions.
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Management Report
Counterparty default risk Counterparty default risk is the risk that arises as a result of default or as a result of a
change in the credit rating or assessment of creditworthiness (credit spread) of security
issuers, counterparties and other debtors with accounts payable. In addition to regulatory monitoring, counterparty default risk is limited and monitored by reference to internal investment ceilings.
For risk management purposes, the acquisition of any investment vehicle is permissible
only if a qualified assessment of creditworthiness by an external agency such as Standard & Poor’s or Moody’s or a qualified internal rating is available. Internal ratings are
used only where no rating has been issued by an external agency. Credit risks are broadly
spread to avoid concentration risks. All investments are constantly monitored in this
regard on the basis of regulatory requirements.
The interest-bearing financial instruments held by the insurance carriers in the Gothaer
Group are divided into two categories for risk management purposes: “liquidity” and
“credit”. The distinction here is whether an instrument presents only an interest risk or
whether an additional credit risk exists because of the solvency of the issuer. So where
a financial instrument entails no or only a minimal default risk, it is assigned to the
“liquidity” category. This is the case, for example, with German government bonds
(bunds) and senior secured covered bonds (Pfandbriefe). The balance sheet book values
of our interest-bearing financial instruments can be regarded as an equivalent for the
maximum default risk of the Gothaer Group. The table below shows the market value of
interest-bearing financial instruments assigned to the “liquidity” and “credit” categories
by rating class, as managed and monitored in the Gothaer Group. Retail funds are not
included.
Interest-bearing
financial instruments
AAA
AA +
AA
AA –
A+
A
A–
BBB+
BBB
BBB–
Speculative Grade (BB+ to D)
Non-rated
as %
2010
2009
39.9
7.9
3.0
7.5
6.0
5.0
8.7
6.8
3.0
4.5
5.9
1.6
45.7
7.3
3.3
6.1
5.6
7.2
6.0
5.7
2.3
3.9
5.8
1.0
The diagram below shows the market value of the financial instruments assigned to the
“liquidity” and “credit” categories.
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Management Report
Interest-bearing
financial instruments
Financial year 2010
Breakdown by
liquidity and credit
53.8 % Liqidity
46.2 % Credit
Financial year 2009
54.5 % Liqidity
45.5 % Credit
The basis for valuing subordinate bonds was switched back entirely to market prices in
2010 because there is now again an active market for these securities.
At year-end, fixed-income securities accounted for around 75 % of the investment
portfolio on the basis of market value. In the area of bearer bonds, without taking
account of retail funds, financials (unsecured/subordinate bonds issued by banks,
insurers or financial service providers) accounted for around 9 % of total investment and
corporates (unsecured/subordinate bonds issued by companies) for around 10 %.
Due to the very diverse developments in the fixed-income and credit markets, the fixed
income portfolio showed a moderate deterioration in unrealized gains and losses overall. While positive developments were seen in subordinate bank bonds, structured credit
products and interest rate movements in the core eurozone countries, spreads in the
peripheral eurozone countries increased sharply. The existing unrealized losses result
from both subordinate financials and peripheral country bonds. In the wake of the
financial crisis, special impairment analyses are being performed for critical investments.
The individual investments identified have been written down to their recoverable
amount.
In view of the still smouldering economic crisis, it is expected that interest will remain
unpaid on certain subordinate bank bonds in the coming financial year. The unpaid
amounts are anticipated in the model price calculations and were recognized in income
in the financial year under review.
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Management Report
Risk concentrations
The Gothaer Group manages concentration risks in line with BaFin Circular 15/2005
by ensuring a broad mix and spread of investment. It also monitors concentrations
of risk in accordance with Sec. 104i of the German Insurance Supervision Act (VAG).
Alongside supervisory regulation, concentration risk is additionally limited by our
internal limit system, which ensures that concentrations at issuer level cannot occur on
a significant scale. The tables below show the financial risk concentrations in the form
in which they are monitored and managed in the Gothaer Group. Distinctions are made
between rating class (see table under Counterparty default risk), sector, country and
issuer concentrations. In aggregating risk concentrations, we adopt the same segmentation practices as independent data providers such as iBoxx.
Shares
Breakdown by sector
Banks
Chemicals
Commodities
Financial services
Healthcare
Household goods
Industrial goods & services
Insurance
Oil & gas
Plant and mechanical engineering
Technology
Telecommunications
Travel and leisure
Utilities
Other
No sectoral assignment
Motor industry
Media
Share in %
2010
2009
0.3
3.1
3.0
2.9
3.4
4.8
27.2
6.8
7.3
4.1
8.3
0.4
0.0
0.4
2.7
17.0
6.0
2.3
0.5
2.4
2.5
2.8
2.6
10.4
9.2
37.7
0.0
10.8
4.8
0.2
2.5
0.1
8.8
4.7
0.0
0.0
Breakdown by country
Austria
Belgium
Finland
France
Germany
Ireland
Italy
Netherlands
Spain
Switzerland
UK
Other
Share in %
2010
2009
0.0
2.3
1.1
4.5
35.1
4.5
7.9
8.3
2.1
9.0
17.1
8.1
1.5
1.9
0.0
4.6
62.6
1.4
0.1
6.6
1.4
3.4
10.4
6.1
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Management Report
Liquidity risk
Liquidity risk is the risk of a company being unable to fulfil its financial obligations
entirely or on time because of a lack of adequate funds. Comprehensive liquidity management at risk carrier level ensures that the necessary liquidity is always available, even
when liquidity requirements peak, and that timely adjustments can be made during the
year through the disposal of marketable securities. The high percentage of government
bonds with the highest liquidity as well as the broad spread of investments in our
portfolio ensure adequate long-term liquidity. This means we can meet our liability-side
obligations at any time with asset-side liquid and realizable funds. No liquidity bottlenecks occurred during 2010.
Substantive payment obligations from real estate commitments totalling around
€ 281 million have been included in liquidity planning for the financial year 2011. In line
with prior-year developments, a liquidity surplus is anticipated over the year as a whole.
The residual terms of liabilities are shown at number 24 in the notes to the consolidated
financial statements.
Scenario analysis
and stress scenarios
• Stress scenarios
The Gothaer Group companies satisfy all four variants of the stress test prescribed by
the Federal Financial Supervisory Authority (BaFin). Based on data from financial statements, these stress tests simulate very negative capital market changes – sometimes for
both shares and fixed-income securities or investment property – and examine the
impact on the insurer’s financial statements. The target horizon is the next reporting
date. Surplus cover – even in this exaggerated stress scenario – indicates the riskbearing capacity and stability of the Gothaer Group insurance companies.
• Scenario analysis
In scenario analysis, the risks defined above are quantified and aggregated on the
basis of the year-end value of the portfolio. Sensitivity analysis pursuant to the German
accounting standard DRS 5-20 produced the following figures for the Gothaer Group.
An increase of 100 basis points in the interest curve and a modified duration of 4.8
reduced the market value of fixed-income securities by € 931.8 million in comparison to
the year-end value of the portfolio. An isolated parallel 100-basis-point rise in the spread
curve reduced the market value of the bond portfolio susceptible to credit risk by
€ 382.8 million. Taking into account hedging measures, a decrease of 20 % in trading
prices resulted in a fall in market value of € 395.0 million in the case of shares and
other non-fixed-income financial instruments. A decrease of 10 % in the market value of
the property investments of the Gothaer Group represents € 187.1 million. The following
table shows the possible change in equity assuming the above sensitivities. For an
assessment of the impact on equity, please refer to the section on accounting policies,
especially the rules on impairment testing.
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Management Report
Scenario analysis
€ million
Impact on equity
Decrease in market
value
Change in equity
not recognized in
statement of income
Change in equity
recognized in
statement of income
2010
2009
2010
2009
2010
2009
Fixed-income securities
(interest change risk)
931.8
826.8
61.2
54.2
0
0
susceptible to credit risk
(counterparty default risk)
382.8
375.3
24
19
0
0
Shares and other
non-fixed-income financial
instruments (price risk)
395
354.3
0
0
142.9
133.7
187.1
171.4
25.1
23.6
0
0
1,896.70
1,727.80
110.3
96.8
142.9
133.7
Property (price risk)
Total
Operational and other risks
Information and communication technology (ICT) is an indispensable tool for an insurance company and, due to the increasing importance of process support and automation, plays a central role in Gothaer Group risk management. Owing to growing dependence on ICT, security mechanisms have been systematically improved and stabilized in
recent years. We also guarantee compliance with the provisions of the German Federal
Data Protection Act (Bundesdatenschutzgesetz) and protect business-critical applications by using a business continuity management process that not only ensures technological integrity but also safeguards critical business processes.
Accounting controls have been set up and other organizational arrangements made to
guarantee the regulatory compliance of financial statements. Among the organizational
arrangements, special mention should be made of our accounting policies. Uniform
recognition, valuation and reporting rules for all items in the consolidated balance sheet
and consolidate statement of income are documented in an IFRS accounting manual.
This is regularly updated and circularized within the Group. Any changes in the guidelines
are made in accordance with a clearly defined procedure. The organizational arrangements also include clear assignment of responsibilities for accounting systems and data
interfaces. Moreover, closing dates are planned and monitored in detail. Financial statements are compiled at the Group’s headquarters in Cologne using a centralized system.
IFRS underwriting and non-underwriting transactions are recorded as a matter of principle at the companies included in the consolidated financial statements. Most of the
companies use a standard ledger with harmonized master files and uniform processes
for this task. The data from the individual company are forwarded to the Group Accounts
Department via an automated interface. The Group databases – like all other databases
– are regularly backed up.
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Management Report
General observance of the “four-eyes” principle is one of the key elements of the internal monitoring system. In addition, system checks and content scans are performed
during the preparation of the consolidated financial statements, e.g. when data are
transmitted by reporting units, where intra-group transactions are eliminated and at
other stages. Errors identified here are analyzed and eliminated. Other elements of the
internal monitoring system are clear regulation and verification of authority as well as
clear assignment of responsibility for bookkeeping systems. Accounting system access
is regulated by authorization rules. Consolidated financial accounting processes are also
documented and made available to the auditor during the audit.
The units involved in the reporting process continue to be integrated in the Gothaer
Group risk management system. Verification of the various elements is performed by the
Internal Auditing unit. The challenges presented by changes in accounting rules are also
met by constant further development and training of employees.
By keeping abreast of legislative activity and current case law, we are able to respond
romptly to developments and implement change immediately according to the specific
circumstances of the Company.
Foreseeable changes in population demographics and the consequences of the financial
market crisis present significant human resource risks. HR activity is already influenced
by the “war for talent” and the resultant risks in terms of scarcity, departure, motivation,
adaptation and loyalty as well as market developments due to the financial market
crisis that are not yet predictable. Coordinated HR information and management
systems guarantee that quantitative and qualitative hazard potentials are promptly
identified and countered with appropriate measures. Prospects for personal development in combination with competitive performance-based incentive instruments help
us ensure that employees remain motivated even in times of constant change and
that high performers and individuals with high potential are retained.
Internal guidelines and checks are in place to prevent life insurance or refund-ofpremium accident insurance being used to launder money or finance terrorism.
Summary of the risk situation
The own funds of € 1.48 billion derived from the group equity of the Gothaer Group
exceed the amount needed to meet solvency requirements by € 500.3 million.
In 2010, Standard and Poor’s confirmed its A– (very good) financial strength ratings for
Gothaer Allgemeine Versicherung AG, Gothaer Krankenversicherung AG and Gothaer
Lebensversicherung AG and FitchRatings again gave A ratings (very good) for Gothaer
Allgemeine Versicherung AG and Gothaer Lebensversicherung AG. The A rating (good)
awarded by ASSEKURATA for Gothaer Krankenversicherung AG remains in place.
The control mechanisms, instruments and analytical processes described above ensure
effective risk management. At the present time, we see nothing in the risk situation of
the individual Group companies that might jeopardize the fulfilment of commitments
assumed under insurance contracts.
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Management Report
Outlook
General economic outlook
Global economic recovery is expected to continue in 2011, although the dynamism of
the upswing is likely to slacken. As a consequence, a further increase in production
capacity utilization is anticipated, easing the pressure on labour markets.
In view of the structural problems that exist in a number of developed economies,
however, the improved labour market situation is not expected to produce a considerable rise in wage pressure. So general inflationary pressure in the United States and
eurozone is likely to increase only moderately.
This moderate inflation should give the central banks an opportunity to mop up surplus
liquidity in the financial system gently without having to raise key lending rates sharply.
As a result, it is not anticipated that interest rates will increase massively in the bond
markets. On the contrary, the yields of government bonds with a residual term of 10 years
are expected to return to a normal level of around 3.5 % to 4.0 % in the United States
and the eurozone.
This environment could prompt institutional investors to opt for higher-risk investments
such as shares. If they abandoned their caution towards shares even partly, the
increased demand would impact positively on the price of dividend-bearing securities.
However, profit-taking or the euro debt crisis may cause temporary disruptions and thus
lead to volatile market phases.
The risk of the global economy sliding back into recession, coupled with deflation and
sustained low interest rates, can be considered small from the present perspective.
However, it also seems unlikely at present that the global economic recovery will
continue at an undiminished pace, which would present an increased risk of inflation
and significantly higher interest rates.
Developments in the insurance industry
After the insurance industry’s steady performance through the financial and economic
crisis, which strengthened its competitive position, the first signs of an upward trend
were noted in the second half of 2010. That upswing will continue through 2011, although
the current environment is marked by sustained intense competition and a constant
stream of new and modified legislative and regulatory requirements. On the whole,
business is rated at least ‘satisfactory’ by the majority of companies. Expectations are
thus higher in the insurance sector than in industry in Germany.
(NB: All the above and following market statements are based on the economic appraisal
published by the Gesamtverband der Deutschen Versicherungswirtschaft e.V., in “GDV
Volkswirtschaft, Konjunktur und Märkte 02/2010”).
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Management Report
Outlook for the Gothaer Group
The future development of the Gothaer Group will be largely defined by its core fields of
business, i.e. the Property/Casualty, Life and Health segments. Because these segments
have both shared and separate environments, the prognosis in terms of opportunities
for future development is made on the basis of these segments.
Environment
Business expectations remain broadly stable in property/casualty insurance. Private
client business is profiting from the stable economic position of private households,
corporate client business from the general economic recovery in Germany, although
buoyancy is less pronounced here owing to uncertainty about future economic developments. At the same time, scope for growth in many lines of property/casualty insurance
is curbed by ruinous price competition, which has been going on for years in some areas,
a high degree of market penetration as well as price sensitivity of demand. In motor
insurance, which is the largest line in the property/casualty segment, 2010 produced
the first premium volume for years that has not been recessive. The upturn is also
forecast to continue through 2011, although at a slower pace. In liability insurance, where
premium volume fell in 2010, scope for premium adjustments and other factors are
expected to produce 1.5 % premium volume growth in 2011. A low level of premium
growth is also anticipated in 2011 in accident insurance and the property insurance lines.
Overall, premium revenues from property/casualty insurance are expected to grow
by 1 % in 2011.
Outlook
We divide property/casualty insurance business into a private client segment and a
corporate client segment. Within the property/casualty insurance market, we have
positioned ourselves as a profitable insurer in the middle and upper private client
segment as well as in the corporate client segment. We will further strengthen that
positioning in the coming years. In the private client segment, we systematically implement an established product and price strategy for the development of new products.
In the corporate client segment, the focus is on further developing local expertise and
increasing engagement in growth areas such as renewable energies, multi-risk business
and international insurance programmes.
Owing to the acquisition of the Polish insurer PTU, which needs to be fully consolidated
for the first time in 2011, premium income in the Property/Casualty segment will increase
by a sum in the low hundreds of millions. According to current projections, this one
off effect will be set against a further moderately recessive volume of premiums from
German insurance business in 2011. In 2012, increases in premium volume are anticipated in both domestic and international business. Corporate client business and private
client business will make different contributions to that growth.
Corporate client business is forecast to remain on a steady growth path through 2011
and 2012, with all insurance lines contributing positive figures. The main dynamos
of growth will be engineering and liability insurance. The result achieved in engineering
insurance will be largely due to the development of the renewable energy market.
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Management Report
We intend to further improve our already strong competitive position in this field of
business. However, growth is also expected to be fuelled by traditional electronic and
machinery portfolio business, which depends on the business performance of our
clients. As a result of the economic recovery, liability business will again generate
premium growth in 2011 and 2012 and thus remain the largest single line within the
corporate client segment.
In private client business, growth opportunities in the next two years will continue to
be shaped by the development of private motor premiums. We will continue to limit
our participation in the tough competition that prevails in this line of insurance.
We will systematically adhere to our product and price strategy in 2011 and 2012 and
will also continue to pursue a policy of risk-sensitive acquisition and underwriting. As a
result, we expect to be able to maintain or moderately lower loss ratios. Our efforts are
also geared to achieving further improvements in cost efficiency. Against this backdrop,
we expect our net combined ratio to remain below 100 %. Owing to our investment strategy geared to sustainable current returns, we also anticipate stable investment income.
Life segment
Environment
In life insurance, business expectations are subdued, especially for endowment
policies, whereas the prospects for biometric risk products are significantly more
positive. The trend towards more pension plan products in the German life insurance
sector is forecast to continue, although there is still scope for an increase in the level
of funded provision for old age. However, the continuing reluctance of private households to conclude long-term contracts continues to curb new business in regular-premium products, even though the attractiveness of life insurance in general has been
enhanced by stability offered in the financial and economic crisis. Furthermore, the
expansion of business in earlier years is now producing a growing number of contract
maturities and thus downturns in premium income that are not likely to be made up
by new regular-premium business. Overall, coupled with an assumed moderate fall
of – 10.0 % in single premiums, these developments will result in a forecast decline
of – 3.5 % in premium income from life insurance business in 2011.
Outlook
Against the backdrop of the environment described above, we see Gothaer well positioned in the Life segment in 2011 and 2012. We are confident that systematic gearing
to our strategic fields of business – company pension schemes and unit-linked biometric products – as well as the introduction of our new hybrid product Gothaer VarioRentReFlex will provide sustained growth stimuli from 2011 onwards. The outstanding
accolades received for our products attest to the quality of our insurance.
As well as observing stringent underwriting guidelines, we will continue to implement
the measures initiated in 2009 to optimize processes and structures and simultaneously
improve quality of service and marketability.
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Management Report
With good rating updates, currently constant surplus bonuses and the bundles of
measures that have been initiated, we expect to return to our targeted growth path in
2011 and 2012. We expect new business to increase in relation to last year, making for
moderate premium volume growth in the region of 1-2 %. According to our projections,
underwriting expenses will be moderately recessive through to the end of 2012. Despite
reinvestment interest remaining low, we anticipate a stable to moderately buoyant net
yield on investments in 2011 and 2012. The mainstay of the projected net results
will again be stable current income from a well-selected bond portfolio.
Recent years have seen the intrinsic value and earning power of the Life segment
strengthen on the liabilities side of the balance sheet. The coming years will see that
contribute to a positive development of the segmental result.
Health segment
Environment
The development of private health insurance business is essentially dependent
on healthcare policy and the relevant legal environment. Against that backdrop, the
Company’s business expectations have improved. However, the positive outlook is
clouded by demographic developments. The potential pool of new clients for private
health insurers is particularly restricted by contraction of the younger age groups. In
2011, the net increase in the number of people with a comprehensive private health
policy is expected to be 100,000. One of the factors shaping this increase is the end, on
31 December 2010, of the 3-year moratorium on employees switching from statutory
to private health insurance. Another contributor is the increased tax deductibility of
insurance premiums. Apart from the increase in premium income fuelled by portfolio
growth, private health insurance premiums will also be boosted in 2011 by premium
adjustments due to higher benefit expenses and by significantly higher depreciation on
unpaid premiums (worth around € 250 million according to an estimate by the private
health insurers association in 2011). Overall, the volume of private health insurance
premiums is expected to rise by 6 % in 2011.
Outlook
One major focus in the Health segment in 2011 will again be on maintaining achieved
growth. Accordingly, we plan to increase premium revenues steadily through to 2012,
at an average of 3 % to 4 % a year, and continuously expand the policyholder base of
our portfolio.
We also plan to adhere systematically to the marketing strategy revised in 2008 addressing four defined submarkets (market segments). In the first market segment – the classical comprehensive and supplementary private health insurance market – 2009 and
2010 showed Gothaer to have a competitive range of products. Supplementary insurance business will be further increased via the second (collective business with corporate clients) and fourth (direct/retail cooperation) market segments. The third market
segment is the private/statutory convergence market. The dominant cooperations of the
past – with statutory health insurance schemes – will be successively developed into
strategic partnerships.
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Management Report
In the coming years, we aim to stabilize the volume of new business that has grown
steadily over the past years. Factors that may depress the level of new business are
tighter acceptance guidelines, cutbacks in the scales for no-claims premium refunds
and premium adjustments made or pending.
Another unchanged priority is to stabilize profitability at the level achieved. Although
benefit expenses will steadily rise, we anticipate a relatively constant loss ratio. With
underwriting expenses fairly static, premium growth is expected to produce a moderate
downturn in cost ratios. Despite the difficult conditions that still persist in the financial
markets, we anticipate a stable or moderately increasing return on investment in the
future.
General
The full scale of the major earthquake in the east of Japan and the devastating global
economic consequences of the tsunami and impending nuclear catastrophe cannot
be predicted at the present time.
Because we service many clients that are engaged in business activities worldwide,
we are also an insurer of risks in Japan. The aggregate insured sums in property and
consequential loss insurance are in the low tens of millions. The largest single risk
underwritten is a property risk insured for the gross sum of 11 million euros. Whether
contingent business interruption losses will occur at the risk locations identified cannot
be conclusively assessed at present. However, they are not anticipated. No losses at all
have yet been reported.
No other events of special significance occurred after the conclusion of the financial
year.
The forecasts and assessments of future business development contained in this
Annual Report are provided on the basis of what is known at the present time. Economic
developments, upheavals in financial markets, changes in legal, tax and demographic
conditions as well as changes in the competitive environment may cause the parameters
underlying the forecasts to develop differently.
69
70
71
Consolidated Statement of Financial Position
Assets
€ million
Notes
2010
2009
Opening
balance
sheet
2009
A. Intangible assets
I. Goodwill
II. Other intangible assets
Total A.
[1]
[2]
25.1
153.9
179.0
25.1
135.7
160.8
25.1
127.7
152.8
B. Tangible assets
[3]
186.1
195.1
207.7
[4]
[5]
84.0
89.7
92.9
1,707.2
1,460.0
1,402.0
115.0
1,822.2
2,173.1
6,692.5
11,092.5
70.2
1,530.2
2,280.7
6,994.7
10,831.0
70.7
1,472.7
2,802.7
7,011.9
8,251.4
70.1
11.8
81.9
931.1
22,877.3
62.9
7.3
70.2
788.6
22,585.1
408.9
3.1
412.0
1,407.6
21,451.2
1,401.1
1,124.7
904.1
91.0
117.8
208.8
687.0
895.8
108.1
98.1
206.2
624.2
830.4
160.8
90.1
250.9
588.1
839.0
305.4
247.0
274.6
88.9
1,285.4
425.0
– 4.1
1,795.2
89.7
1,307.0
448.9
– 8.6
1,837.0
79.2
1,327.0
501.7
– 5.5
1,902.4
0.0
0.0
0.0
1,052.9
69.0
983.9
1,036.9
71.0
965.9
C. Investments
I. Investment property
II. Shares in affiliated and associated companies
1. Shares in affiliated and associated companies
– Investments available for sale
2. Shares in associated companies
– Carried at equity
Total II.
III. Investments held to maturity
IV. Loans
V. Investments available for sale
VI. Investments measured at fair value through profit or loss
1. Held for trading
2. By designation
Total VI.
VII.Other investments
Total C.
[6]
[7]
[8]
[9]
[10]
D. Investments held for unit-linked life insurance policies
E. Receivables
I. Receivables from primary insurance business
1. from policyholders
2. from intermediaries
Total I.
II. Other receivables
Total E.
[11]
F. Cash and cash equivalents
G. Reinsurers’ share of underwriting reserves
I. Unearned premiums
II. Policy reserves
III. Reserves for unpaid claims
IV. Other underwriting reserves
Total G.
H. Reinsurers’ share of underwriting reserves for unit-linked
life insurance policies
I. Deferred acquisition costs
I. Gross
II. Reinsurers’ share
Total I.
[12]
1,038.5
58.3
980.2
J. Tax assets
I. from current taxation
II. from deferred taxes
Total J.
[13]
84.3
423.7
508.0
128.6
360.6
489.2
123.1
326.2
449.3
K. Other assets
[14]
9.1
9.7
10.8
29,137.2
28,462.9
27,157.8
Total assets
72
Equity and liabilities
€ million
A. Equity
I. Revenue reserves
II. Other reserves
III. Consolidated net profit for the year attributable to
shareholders of the parent company
Total I.–III. (Group equity)
IV. Minority interests
Total A.
B. Gross underwriting reserves
II. Policy reserves
Total B.
Notes
2010
2009
Opening
balance
sheet
2009
[15]
1,046.7
24.4
969.9
19.4
906.5
– 26.4
81.7
1,152.8
72.7
1,225.5
76.4
1,065.7
32.5
1,098.2
62.1
942.2
35.6
977.8
491.5
18,158.1
2,221.6
1,715.4
22,586.6
464.9
17,709.8
2,234.6
1,776.9
22,186.2
431.5
16,774.1
2,262.4
1,589.3
21,057.3
1,401.1
1,124.7
904.1
312.5
119.8
432.3
306.3
113.9
420.2
299.4
110.0
409.4
35.0
264.7
187.6
35.0
264.7
187.6
35.0
264.7
199.7
[24]
737.9
29.1
767.0
1,694.7
2,949.0
805.0
32.1
837.1
1,729.7
3,054.1
859.2
32.0
891.2
1,845.3
3,235.9
[25]
100.4
442.3
542.7
167.6
411.9
579.5
151.1
422.2
573.3
29,137.2
28,462.9
27,157.8
[16]
[17]
[18]
[19]
[20]
[21]
C. Gross underwriting reserves for unit-linked life insurance
policies
D. Other accrual
I. Provisions for pension benefits and similar obligations
II. Other accruals
Total D.
E. Liabilities
I. Participation certificates
II. Subordinate liabilities
III. Bonds and loans
IV. Liabilities from primary insurance business
1. towards policyholders
2. towards intermediaries
Total IV.
V. Other liabilities
Toital E.
F. Tax debts
I. for current taxation
II. for deferred taxes
Total F.
Total equity and liabilities
[22]
[23]
73
Consolidated Statement of Comprehensive Income
€ million
Notes
2010
2009
[26]
4,002.9
347.5
3,655.4
4,248.6
380.6
3,868.0
[26]
– 26.0
1.0
– 27.0
– 33.5
– 10.6
– 22.9
[26]
377.7
0.0
377.7
483.1
0.1
483.0
4. Net premiums earned
[26]
3,250.7
3,362.1
5. Investment result
of which: income from associated companies
[27]
822.2
29.3
664.9
21.6
6. Income from investments held for unit-linked life
insurance policies
[27]
191.9
179.2
7. Other income
[28]
142.7
144.0
4,407.5
4,350.2
[29]
3,591.9
241.6
3,350.3
3,590.8
215.3
3,375.5
[30]
750.1
76.2
673.9
758.4
110.1
648.3
I. Statement of income (recognized through profit or loss)
1. Premiums written
a) Gross
b) Reinsurers’ share
2. Change in unearned premiums
a) Gross
3. Savings components
a) Gross
Total income
8. Policyholder benefits
a) Gross
9. Underwriting expenses
a) Gross
10. Other expenses
[31]
Total expenses
11. Operating result
12. Financing expenses
13. Taxes on income
[32]
14. Net profit for the year
of which attributable to shareholders of the parent company
of which attributable to minority interests
II. Other comprehensive income (recognized directly in equity)
15. Unrealized gains and losses on investments
16. Change in valuation at equity
III. Comprehensive income
of which attributable to shareholders of the parent company
74
[33]
254.7
259.4
4,278.9
4,283.2
128.6
67.0
21.4
25.1
16.2
– 36.1
91.0
81.7
9.3
78.0
76.4
1.6
32.4
0.6
48.6
0.0
124.0
87.3
36.7
126.6
122.3
4.3
Statements of Changes in Equity
€ million
Group equity
Minority
interests
Total
Revenue
reserves
Other
reserves
Consolidated proft
for the Year
906.5
–26.4
62.1
35.6
977.8
62.1
0.0
– 62.1
0.0
0.0
Comprehensive income
0.0
45.8
76.4
4.4
126.6
Dividend
0.0
0.0
0.0
– 7.6
– 7.6
Other
1.3
0.0
0.0
0.1
1.4
969.9
19.4
76.4
32.5
1,098.2
0.6
0.0
0.0
9.1
9.7
76.4
0.0
– 76.4
0.0
0.0
Comprehensive income
0.0
5.0
81.7
35.0
121.7
Dividend
0.0
0.0
0.0
– 6.0
– 6.0
– 0.2
0.0
0.0
2.1
1.9
1,046.7
24.4
81.7
72.7
1,225.5
Balance as of
1 January 2009
Allocation to
revenue reserves
Balance as of
31 December 2009
Changes in the scope
of consolidation
Allocation to
revenue reserves
Other
Balance as of
31 December 2010
As a mutual insurance association, the Group parent, Gothaer Versicherungsbank VVaG,
has no subscribed capital. Equity is generated exclusively through retention of earnings.
The increase in minority interests is due to the initial consolidation of Metrawatt
Holding AG and capiton Gießereitechnik GmbH.
75
Statement of Cash Flows
€ million
2010
2009*
91.0
78.0
Change in underwriting reserves
470.9
829.0
Change in underwriting reserves for unit-linked life insurance policies
276.3
220.5
3.7
– 18.0
– 17.5
– 17.9
Net profit for the year**
Change in deferred acquisition costs
Change in deposits retained on assumed business/received from
reinsurers and receivables/liabilities in connection with
Change in investments measured at fair value through profit or loss
– 207.3
88.6
Change in other receivables and other liabilities
– 56.7
– 100.4
Change in deferred tax assets and deferred tax liabilities
– 29.4
– 74.1
– 100.0
28.9
– 43.2
– 49.9
– 159.3
116.6
56.8
68.2
Cash flow from operating activities
285.3
1,169.5
Cash outflows for the purchase of consolidated companies
– 40.1
0.0
Cash inflows from the disposal of consolidated companies
0.0
0.0
Cash outflows for the purchase of other investments
– 8,324.8
– 11,385.1
Cash inflows from the disposal of other investments
8,184.2
10,181.3
Change in other balance sheet items
Realized gains and losses on investments
Correction for investment result and expenses without
cash inflows/outflows
Correction for other income and expenses without
cash inflows/outflows
Change in investments for unit-linked life insurance policies
21.4
90.7
8.3
10.4
– 54.2
– 50.0
– 205.2
– 1,152.7
Cash inflows from company owners and minority shareholders
18.7
0.4
Cash outflows for company owners and minority shareholders
– 16.5
– 0.1
– 6.0
– 7.6
Other
– 21.3
– 37.1
Cash flow from financing activities
– 25.1
– 44.4
55.0
– 27.6
247.0
274.6
3.4
0.0
305.4
247.0
Other cash inflows
Other cash outflows
Cash flow from investing activities
Dividend
Change in cash and cash equivalents
Cash and cash equivalents at the beginning of financial year
Change in cash and cash equivalents due to change in scope of
consolidation
Cash and cash equivalents at the end of financial year
* Comparatives after restatement
**Including minority interests
76
Other information on statement of cash flows
€ million
2010
2009
Operating activities
Taxes on income paid (net)
Interest paid
Interest received
Dividend received
24.7
43.1
724.0
154.1
55.1
30.8
849.4
210.7
Financing activities
Interest paid
– 21.4
25.1
Acquisitions and
A 49.47 % shareholding in the Polish insurance company Polskie Towarzystwo Ubezdisposals of subsidiaries pieczeń S.A. was acquired in the financial year. For further details, please refer to the
information about the scope of consolidation on page 88.
77
Segmental Report
Segment assets
Property/Casualty
2010
2009
2010
2009
A II. Other intangible assets
74.1
72.1
18.3
17.0
B. Tangible assets
14.0
13.9
1.8
2.0
0.0
0.0
0.0
0.0
260.5
243.8
855.1
736.5
1,003.6
964.5
399.7
416.9
1,264.1
1,208.3
1,254.8
1,153.4
III. Investments held to maturity
314.7
336.6
1,287.3
1,331.9
IV. Loans
903.0
885.3
4,799.1
4,635.0
1,154.3
1,079.6
7,510.8
7,787.0
7.3
2.1
9.0
0.0
46.8
6.4
47.7
7.3
9.4
9.0
53.2
55.0
238.1
304.0
370.7
261.3
3,883.6
3,822.8
15,275.9
15,223.6
C. Investments
I. Investment property
II. Shares in affiliated and associated companies
1. Shares in affiliated and associated companies
– Investments available for sale
2. Shares in associated companies
– carried at equity
Total II.
V. Investments available for sale
VI. Investments measured at fair value through
profit or loss
1. Held for trading
2. By designation
Total VI.
VII.Other investments
Total C.
D. Investments held for unit-linked
0.0
0.0
1,401.1
1,124.7
E. Reinsurers’ share of underwriting reserves
508.8
521.4
1,286.5
1,308.3
F. Reinsurers’ share of underwriting reserves
for unit-linked life insurance policies
0.0
0.0
0.0
0.0
44.0
41.2
770.1
782.6
637.0
750.2
725.1
703.2
5,161.5
5,221.6
19,478.8
19,161.4
G. Deferred acquisition costs
H. Other segment assets
Total segment assets
78
Life
€ million
Health
Other Activities
Consolidation
Total
2010
2009
2010
2009
2010
2009
2010
2009
43.5
31.8
18.0
14.8
0.0
0.0
153.9
135.7
1.3
1.5
190.3
199.3
–21.3
–21.6
186.1
195.1
0.0
0.0
114.8
121.8
– 30.8
– 32.1
84.0
89.7
320.4
264.8
271.2
214.9
0.0
0.0
1,707.2
1,460.0
133.6
126.0
1,221.9
1,182.0
– 2,643.8
–2,619.2
115.0
70.2
454.0
390.8
1,493.1
1,396.9
– 2,643.8
–2,619.2
1,822.2
1,530.2
571.1
612.2
0.0
0.0
0.0
0.0
2,173.1
2,280.7
1,683.1
1,552.1
157.5
211.9
– 850.2
– 289.6
6,692.5
6,994.7
1,890.7
1,805.3
536.7
159.1
0.0
0.0
11,092.5
10,831.0
9.8
3.3
5.2
0.0
6.2
0.0
1.0
0.0
0.0
0.0
0.0
0.0
70.1
11.8
62.9
7.3
13.1
5.2
6.2
1.0
0.0
0.0
81.9
70.2
142.0
89.9
180.3
133.4
0.0
0.0
931.1
788.6
4,754.0
4,455.5
2,488.6
2,024.1
–3,524.8
–2,940.9
22,877.3
22,585.1
0.0
0.0
0.0
0.0
0.0
0.0
1,401.1
1,124.7
0.6
0.6
60.4
78.0
–61.1
–71.3
1,795.2
1,837.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
166.1
160.1
0.0
0.0
0.0
0.0
980.2
983.9
198.9
150.2
286.2
254.7
–128.9
–282.0
1,718.3
1,576.3
5,164.4
4,799.7
3,043.5
2,570.9
–3,736.1
–3,315.8
29,112.1
28,437.8
79
Segment liabilities
Property/Casualty
2010
2009
491.5
464.8
0.0
0.0
50.9
51.4
14,336.8
14,088.0
1,746.7
1,763.5
56.1
54.3
25.5
19.4
1,070.4
1,153.2
2,314.6
2,299.1
15,463.3
15,295.5
0.0
0.0
1,401.1
1,124.7
C. Other accruals
232.1
230.0
76.2
82.3
D. Other segment liabilities
802.8
937.1
2,250.6
2,373.4
3,349.5
3,466.2
19,191.2
18,875.9
A. Gross underwriting reserves
II. Policy reserves
IV. Other gross underwriting reserves
Total A.
B. Gross underwriting reserves for
unit-linked life insurance policies
Total segment liabilities
80
Life
2010
2009
€ million
Health
Other Activities
2010
2009
2010
Consolidation
2009
2010
Total
2009
2010
2009
0.0
0.1
0.0
0.0
0.0
0.0
491.5
464.9
3,786.4
3,580.5
0.0
0.0
– 16.0
– 10.1
18,158.1
17,709.8
153.0
136.2
327.0
352.0
– 61.2
– 71.4
2,221.6
2,234.6
847.6
807.6
0.0
0.0
– 228.1
– 203.3
1,715.4
1,776.9
4,787.0
4,524.4
327.0
352.0
–305.3
–284.8
22,586.6
22,186.2
0.0
0.0
0.0
0.0
0.0
0.0
1,401.1
1,124.7
28.2
26.5
95.8
81.5
0.0
–0.1
432.3
420.2
174.7
98.0
736.0
812.5
–472.4
–587.4
3,491.7
3,633.6
4,989.9
4,648.9
1,158.8
1,246.0
–777.7
–872.3
27,911.7
27,364.7
81
Segment statement
of income
Property/Casualty
Life
2010
2009
2010
2009
0.0
0.0
0.0
0.0
1,648.3
1,648.3
1,627.5
1,627.5
1,524.3
1,524.3
1,847.0
1,847.0
1,357.3
1,317.0
1,068.9
1,276.6
188.1
2.3
255.6
8.3
610.9
3.3
491.5
16.4
0.0
0.0
191.9
179.2
113.3
122.1
35.2
46.6
1,658.7
1,694.7
1,906.9
1,993.9
6. Policyholder benefits (net)
928.2
880.7
1,611.3
1,737.1
7. Underwriting expenses (net)
421.3
382.1
163.3
185.4
8. Other expenses
171.4
187.2
71.6
82.9
1,520.9
1,450.0
1,846.2
2,005.4
137.8
244.7
60.7
– 11.5
14.7
14.6
4.1
4.1
4.5
33.3
29.0
–22.3
118.6
196.8
27.6
6.7
13. Expense from transfer of profit
52.6
58.2
17.5
11.2
14. Net profit for the year after transfer of profit
66.0
138.6
10.1
–4.5
1. Gross premiums written
from insurance business with other segments
from insurance business with
non-related third parties
2. Net premiums earned
of which: income from associated companies
4. Income from investments held for unit-linked
5. Other income
Total income
Total expenses
9. Operating result
10. Financing expenses
11. Taxes on income
12. Net profit for the year prior to transfer of profit
15. Minority interests
16. Consolidated profit for the year attributable
to shareholders of the parent company*
* The consolidated profit for the year is shown only for the Group as a whole. Segmentation would
result in an inaccurate presentation due to interlocking intersegmental arrangements.
82
€ million
Health
Other Activities
Consolidation
Total
2010
2009
2010
2009
2010
2009
2010
2009
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
830.2
830.2
773.5
773.5
0.1
0.1
0.6
0.6
0.0
0.0
0.0
0.0
4,002.9
4,002.9
4,248.6
4,248.6
824.4
767.9
0.1
0.6
0.0
0.0
3,250.7
3,362.1
179.0
0.3
135.9
5.8
169.5
30.6
124.5
– 1.9
–325.3
– 7.2
–342.6
– 7.0
822.2
29.3
664.9
21.6
0.0
0.0
0.0
0.0
0.0
0.0
191.9
179.2
11.7
14.8
308.4
294.7
–325.9
–334.2
142.7
144.0
1,015.1
918.6
478.0
419.8
–651.2
–676.8
4,407.5
4,350.2
858.8
801.8
1.6
–0.9
–49.6
–43.2
3,350.3
3,375.5
87.5
78.2
1.8
2.6
0.0
0.0
673.9
648.3
23.8
22.7
326.3
301.2
–338.4
–334.6
254.7
259.4
970.1
902.7
329.7
302.9
–388.0
–377.8
4,278.9
4,283.2
45.0
15.9
148.3
116.9
–263.2
–299.0
128.6
67.0
0.0
0.0
16.7
20.6
–14.1
–14.2
21.4
25.1
13.2
4.9
1.3
–3.6
–31.8
–48.4
16.2
–36.1
31.8
11.0
130.3
99.9
–217.3
–236.4
91.0
78.0
0.0
00
80.5
121.0
–150.6
–190.4
0.0
0.0
31.8
11.0
49.8
–21.1
–66.7
–46.0
91.0
78.0
9.3
1.6
81.7
76,4
83
Other information on the segmental reports
€ million
Property/
Casualty
Life
Health
Other Activities
2010
2009
2010
2009
2010
2009
2010
2009
Interest income
94.0
99.9
500.0
582.7
188.6
172.5
43.1
18.5
Interest expense
25.8
28.1
63.5
56.2
1.7
2.4
49.4
34.5
Scheduled depreciation
and amortization
14.5
14.4
3.3
2.5
1.5
1.2
20.3
28.5
–61.2
–90.2
–261.2
–761.6
–303.6
–259.1
35.5
76.8
Substantive income
(+) and expenses (–)
without cash inflows/
outflows*
* Excluding scheduled depreciation and amortization
In the Property/Casualty, Life and Health segments, the figures stated for scheduled
depreciation and amortization as well as substantive income and expenses without cash
inflows/outflows do not include depreciation or write-ups on intangible assets or fixed
assets. In the case of insurance companies, these expenses and income are spread
over investment expenses, policyholder benefits and underwriting expenses within the
framework of cost unit accounting.
84
Notes to the Consolidated Financial Statements
Group Accounting Policies
Gothaer Versicherungsbank VVaG is the parent of the Gothaer Group. Gothaer Versicherungsbank VVaG must therefore prepare consolidated financial statements and a Group
management report pursuant to sections 341i, 341j and 290 et seq. of the German
Commercial Code (HGB). Gothaer Versicherungsbank VVaG exercises the option pursuant
to section 315a(3) HGB in conjunction with Article 5 of the Regulation (EC) No.1606/2002
of the European Parliament and the council of 19 July 2002 that permits preparation of
the consolidated financial statements and Group management report in compliance with
International Financial Reporting Standards (IFRS). All the International Financial Reporting Standards adopted by the European Union as well as all the relevant regulations in
the HGB are observed in the preparation of the financial statements and report. The IFRS
consolidated financial statements are thus as informative as HGB consolidated financial
statements.
The International Accounting Standards Board (IASB) has been gradually replacing its
International Accounting Standards (IASs) by the International Financial Reporting
Standards (IFRSs) since 2003. In addition, the interpretations of the International
Financial Reporting Interpretations Committee (IFRIC), formerly the Standing Interpretations Committee (SIC), were also observed. The IASB had not completed its regulations governing the recognition and measurement of insurance transactions in 2009.
Consistent with the framework of IFRS and IAS 1/IFRS 4, US Generally Accepted Accounting Principles (US GAAP) were therefore applied, in particular Financial Accounting
Standards (FAS) 60 and 97.
The consolidated financial statements are denominated in euros and amounts are shown
in millions of euros. The consolidated financial statements consist of the consolidated
statement of financial position and consolidated statement of comprehensive income,
the statement of changes in equity, the statement of cash flows, segmental report and
the notes to the consolidated financial statements. The consolidated financial statements are supplemented by a Group management report. In addition to business
developments in the various segments, the latter contains statements on capital
management as well as a risk report and outlook.
In keeping with the internal reporting structure of the Gothaer Group, the segmental
reports distinguish between the segments Property/Casualty, Life, Health and Other
Activities. At the same time, the segments reflect the core areas of business of the Group.
The Property/Casualty segment includes the insurance companies of the Group that
engage in all major lines and types of property/casualty insurance. The Life segment
encompasses the insurance companies that offer all forms of life and pension insurance
as well as related supplementary insurance products. The Health segment relates to the
insurer through which the Group engages in private health insurance. All other
companies are grouped in the Other Activities segment.
85
The presentation of the segments includes consolidation of intrasegmental transactions,
but not, however, intersegmental transactions. Intersegmental consolidation is shown
separately. Transactions between Group companies are effected on market terms as a
matter of principle.
The cash flow statement shows the change in cash and cash equivalents for the financial year. A distinction is made here between cash flows from current operating activities,
investing activities and financing activities. The indirect method is used to report cash
flows from current operating activities. In this case, net profit for the year is adjusted
to eliminate the effects of transactions of a non-cash nature (in particular writeups/write-downs, changes in reserves, receivables and liabilities). Net income or loss for
the period is also adjusted for items of income or expense associated with investing or
financing cash flows. The direct method is used to report cash flows from investing
activities. Inflows and outflows of funds from the accounts of the various companies are
reported here. Essentially, inflows and outflows of funds in connection with acquisitions/disposals are reported. Cash flows are adjusted to eliminate the effects of
changes in the scope of consolidation. The direct method is used to report cash flows
from financing activities. Cash and cash equivalents include current credit balances with
financial institutions, cheques and cash on hand.
86
Principles of Consolidation
All companies whose accounts are included in the consolidated financial statements
compiled financial statements as of 31 December 2010 consistently applying Group
accounting policies. Interim financial statements as of 31 December 2010 were prepared
for special funds with a 31 January 2011 and 30 September 2010 closing date excluding
one fund. In addition, pursuant to IAS 27.27 financial statements of nine associated
companies and 17 property holding companies with cut-off date 30 September 2010 were
included taking into account material transactions between 30 September 2010 and
31 December 2010. For reasons of materiality, the financial statements of the associated
companies were not adapted to the uniform accounting policies of the Gothaer Group.
Subsidiaries and special funds are consolidated if they are controlled directly or indirectly
by the Group. The day on which the Gothaer Group assumes control of a company is taken
as the date of first-time consolidation. The acquisition method of accounting is used for
purposes of capital consolidation. This involves recognition of the assets, liabilities and
contingent liabilities of the acquired undertaking at fair value (complete revaluation) and
offset against the parent company’s share of the equity of the subsidiary. A positive
difference is allocated to the proportionate share of hidden reserves and charges
contained in the assets and liabilities, and goodwill. Goodwill is recognized as an asset
and tested for impairment at least once a year. Negative differences are recorded under
the same headings as positive differences and reversed with recognition in the statement
of income in the year in which they originate.
Income generated by subsidiaries after first-time consolidation is included in the revenue
reserves of the Group after deduction of any minority interests. Minority interests are
shown on the face of the statement of financial position under equity.
Intragroup operating receivables and payables, expenses and income, and profits are
eliminated unless they are of insignificant importance for presentation of the net assets,
financial position and results of operation of the Group. Transactions between Group companies are effected on market terms as a matter of principle.
87
Scope of Consolidation
The determination of the scope of consolidation is subject to materiality, which is
assessed for each company on the basis of equity. In addition, a threshold is applied to
the total equity of the companies judged immaterial. Where the threshold is exceeded,
the company is considered to see whether its consolidation increases the validity of
the consolidated financial statements. If the threshold fails to be reached after firsttime consolidation, the company in question is not deconsolidated on grounds of
immateriality. Materiality is applied as a criterion only to companies that are not engaged
in insurance business. All the Gothaer Group insurance companies are consolidated as
a matter of principle.
Accordingly, 59 subsidiaries (PY: 55) were included in the consolidated financial statements in compliance with IAS 27. They comprised six insurance companies (PY: six), one
pension trust and 52 other companies (PY: 48). 25 special purpose vehicles (PY: 24) were
also consolidated under SIC 12.
capiton Gießereitechnik GmbH and Metrawatt Holding AG as well as the property holding
company RE Apollo Value Enhancement Fund VII Feeder GmbH & Co.KG exceeded the
materiality threshold for the first time as a result of capital measures and were included
in the consolidated financial statements as fully consolidated companies in 2010.
PE Holding USD GmbH & Co.KG was newly established and similarly fully consolidated
for the first time. In addition, two special investment funds were reissued and another
merged into an existing fund.
Four companies (PY: five) jointly owned with non-affiliated companies were recognized
proportionately in accordance with IAS 31. Three of those companies were recognized
proportionately because although the Company is a majority shareholder, it holds only
50% of the voting rights. TRIFORUM Verwaltung GmbH & Co. Objekt Hallbergmoos KG,
which was proportionately consolidated in the past, was liquidated in 2010. Overall, its
deconsolidation produced earnings of € 0.4 million. The assets and liabilities of the joint
ventures are as follows:
Joint-venture
undertakings
88
€ million
Financial information
2010
2009
Opening
balance
sheet 2009
Short-term assets
Long-term assets
22.6
459.7
22.5
468.2
20.2
425.2
Short-term liabilities
Long-term liabilities
32.6
312.0
60.2
289.2
56.4
247.6
Expenses
Income
258.9
274.3
248.1
263.0
265.0
273.7
12 companies (PY: 11) in which a significant influence can be exerted were recognized in
the consolidated financial statements as associates and evaluated by the equity method
in accordance with IAS 28.
In furtherance of our internationalization strategy, shares were acquired on 24 December 2010 in the Warsaw-based Polish company Polskie Towarzystwo Ubezpieczeƒ S.A.
(PTU). The company is a property/casualty insurer catering especially to the motor
insurance market. The price of the shares, which confer 49.47 % voting rights in the company, was € 38.5 million, which reflected the market value at the time. Because Gothaer
was in a position to exert a significant influence on the business and financial policy of
the newly acquired company at 31 December 2010, the company was classed as an associated company, valued by the equity method and recognized as having an equity value
of € 38.5 million. At 31 December 2010, the acquired company had assets of € 117.6 million and liabilities of € 108.7 million. The incidental acquisition costs of € 1.6 million were
recognized as an expense.
As a result of more shares being acquired in January 2011, Gothaer currently has 76.9 %
of voting rights in PTU. € 20.3 million was paid for the additional shares. The processes
needed for consolidation have not yet been concluded. Consequently, there are currently
no further reliable data available pursuant to IFRS 3 B64.
Shares in DKV EURO SERVICE GmbH & Co. KG were contributed to the newly established
EGRIMA Holding GmbH & Co. KG in the financial year.
All the consolidated companies of the Gothaer Group in 2010 (including special purpose
vehicles) are listed below. A list of holdings pursuant to section 313 (4) of the German
Commercial Code (HGB), which includes subsidiaries, joint ventures and associated companies that are not consolidated, is also provided.
89
Subsidiaries (fully consolidated pursuant to IAS 27)
€ thousand
Allgemeine Versicherungs-Software GmbH, Cologne
Asstel Lebensversicherung AG, Cologne
Asstel ProKunde Versicherungskonzepte GmbH, Cologne
Asstel Sachversicherung AG, Cologne
BECURA Beteiligungen und Unternehmensberatung
GmbH, Cologne
capiton Gießereitechnik GmbH, Berlin
capiton II Holding GmbH & Co. KG, Berlin
capiton Zweite Kapitalbeteiligungsgesellschaft mbH,
Berlin
CPI Asia G-Fdr LP GmbH & Co. KG, Frankfurt a.M.
GG-Grundfonds Vermittlungs GmbH, Cologne
Gothaer Allgemeine Versicherung AG, Cologne
Gothaer Asset Management AG, Cologne
Gothaer Beteiligungsgesellschaft USA/Carlyle mbH,
Cologne
Gothaer Dritte Kapitalbeteiligungsgesellschaft mbH,
Cologne
Gothaer Erste Kapitalbeteiligungsgesellschaft mbH,
Cologne
Gothaer Erste Meta Kapitalbeteiligungsgesellschaft mbH,
Cologne
Gothaer Finanzholding AG, Cologne
Gothaer Fünfte Kapitalbeteiligungsgesellschaft
mbH & Co. KG, Cologne
Gothaer Grundbesitz GmbH, Cologne
Gothaer Immobilien Beteiligungsgesellschaft
Méditerranée mbH, Cologne
Gothaer Invest- und FinanzService GmbH, Cologne
Gothaer Krankenversicherung AG, Cologne
Gothaer Lebensversicherung AG, Cologne
Gothaer Pensionskasse AG, Cologne
Gothaer Risk-Management GmbH, Cologne
Gothaer Sechste Kapitalbeteiligungsgesellschaft mbH,
Cologne
Gothaer Systems GmbH, Cologne
Gothaer Vierte Kapitalbeteiligungsgesellschaft mbH,
Cologne
Gothaer Zweite Beteiligungsgesellschaft Niederlande
mbH, Cologne
Gothaer Zweite Kapitalbeteiligungsgesellschaft mbH,
Cologne
Interest*
%
Equity**
Profit or
loss **
100.00
100.00
100.00
100.00
287.8
19,305.0
2,958.6
13,821.0
– 43.9
0.0
0.0
0.0
99.50
72.69
99.00
2,449.2
13,825.0
0.0
1,438.5
1,272.4
0.0
99.00
99.99
100.00
100.00
100.00
56,567.4
17,303.3
– 16,177.4
307,601.8
4,305.3
33,358.3
5,658.0
– 725.9
0.0
0.0
100.00
1,589.3
– 40.6
99.50
67,975.8
– 9,250.5
100.00
5,616.0
– 8.5
99.50
100.00
20,385.1
804,928.5
781.1
0.0
100.00
100.00
148,841.1
2,627.7
11,762.7
– 253.3
100.00
100.00
100.00
100.00
100.00
100.00
301.7
782.3
141,767.3
209,099.4
22,600.0
735.3
– 15.6
– 244.6
14,500.0
0.0
0.0
179.7
100.00
100.00
73,339.8
4,399.4
4,696.7
389.7
99.25
26,460.5
2,214.0
100.00
2,166.2
– 57.7
100.00
9,660.1
618.4
* In the case of interests that are partially held indirectly, economic interests are calculated
** The most recent financial statements acc. to HGB
90
€ thousand
Gotham City Residential Partners I GmbH & Co. KG,
Frankfurt a.M.
Hamburg-Kölner-Vermögensverwaltungsgesellschaft
mbH, Cologne
Janitos Versicherung AG, Heidelberg
JP Morgan IIF German 1 GmbH & Co. KG, Frankfurt a.M.
KE Power GmbH, Berlin
kk Metalltechnik GmbH, Berlin
KR automotive Kapitalbeteiligungs GmbH, Berlin
MediExpert Gesellschaft für betriebliches Gesundheitsmanagement mbH, Cologne
Mermont Holdings GmbH, Munich
Metrawatt Holding AG, Berlin
Munich Carlyle Productions GmbH & Co. KG, Grünwald
PE Holding USD GmbH & Co. KG, Cologne
RE AEW Value Investors Asia Feeder GmbH & Co. KG,
Cologne
RE Apollo Value Enhancement Fund VII Feeder
GmbH & Co. KG, Cologne
RE Brazil Real Estate Opportunities Fund I Feeder
RE BREP Real Estate Partner VI Feeder GmbH & Co. KG,
Cologne
RE Brockton Capital Fund I Feeder GmbH & Co. KG,
Cologne
RE Brockton Capital Fund II Feeder GmbH & Co. KG,
Cologne
RE Carlyle Infrastructure Feeder GmbH & Co. KG, Cologne
RE Carlyle Realty Partners V Feeder GmbH & Co. KG,
Cologne
RE Colony Realty Partners II Feeder GmbH & Co. KG,
Cologne
RE Feeder GmbH, Cologne
RE Gothaer PLA Residential Fund III Green Feeder
RE LaSalle Asia Opportunity Fund III Feeder,
GmbH & Co. KG. Cologne
RE LaSalle Japan Logistic Fund II Feeder GmbH & Co. KG,
Cologne
RE O’Conner Capital Partners II Feeder GmbH & Co. KG,
Cologne
RE Red Fort India Real Estate Fund I Feeder
Tishman Speyer China Feeder (Scots/C), L.P., Edinburgh,
Scotland
Unterstützungskasse der BERLIN-KOELNISCHE
Lebens- und Sachversicherug GmbH, Cologne
Interest*
%
Equity**
Profit or
loss **
99.98
78.6
–58.0
100.00
100.00
74.07
72.69
72.69
72.69
3,579.5
29,375.5
78,128.3
28.4
11,891.6
1.7
0.0
– 303.7
2,150.5
–45.9
14,478.0
– 0.7
100.00
90.00
50.89
100.00
100.00
203.3
2,853.9
15,826.8
– 64,506.2
71,363.0
25.2
– 25.8
0.0
765.5
12.1
100.00
53,703.3
– 35.6
100.00
471.3
413.3
100.00
17,256.3
1.869.3
100.00
27,885.2
–216.8
100.00
20,524.4
– 55.7
100.00
100.00
1,378.6
26,119.4
– 30.5
825.5
100.00
36,777.1
468.5
100.00
100.00
21,684.2
205.3
– 5,646.9
61.4
100.00
28,950.4
52.6
100.00
14,475.9
1,814.6
100.00
6,252.2
– 2.0
100.00
29,561.6
– 1,877.6
100.00
44,870.7
– 127.6
75.76
$ 30,185.5
$ 1,106.5
100.00
2,746.0
–259.8
91
Special purpose vehicles (fully consolidated pursuant to IAS 27 in conjunction with SIC 12)
as %
Interest
LBB-ASL 1-Fonds
LBB-GKR 1 Alpha Euro-Fonds
BB-GKR-Fonds
LBB-GoPK 2-Fonds
BB-GLG2-Fonds
LBB-GoLB-Fonds
LBB-GOMER-Fonds
LBB-GOR-Fonds
LBB-GA1-Fonds
BB-GVBK-Fonds
LBB-INVEST GL 1 Alpha Euro
DMB 1
INKA GL1
INKA GL2
INKA GOF
MI-FONDS 398 / ASL1
MI-FONDS 383 / ASL2
MI-FONDS F63 / MI-DMB
MI-FONDS 399 / GA1
MI-FONDS 405 / GA 2
MI-FONDS 397 / GKR1
MI-FONDS 395 / GKR2
MI-FONDS 396 / HZ
Gothaer Real Estate Fonds
ZAIS Leda Fund / Credos
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
Joint-venture undertakings (consolidated on a proportionate basis pursuant to IAS 31)
€ thousand
CG Car-Garantie Versicherungs-AG, Freiburg i.Br.
Kilos Beteiligungs GmbH & Co. Vermietungs-KG, Pöcking
TRIFORUM Verwaltung GmbH & Co. Objekt IKS Köln KG,
Pöcking
TRIFORUM Verwaltung GmbH & Co. Objekt
Neu-Isenburg II KG, Pöcking
Interest*
%
Equity**
Profit or
loss **
50.00
93.06
46,221.2
38,217.4
8,844.7
2,821.2
93.10
659.4
18.1
94.00
7,848.3
–148.5
92
Associated companies (consolidated at equity pursuant to IAS 28)
as %
Interest*
Aachener Bausparkasse AG, Aachen
ARI-Armaturen Albert Richter GmbH & Co KG, Schloss Holte-Stukenbrock
Bioceuticals Arzneimittel AG, Bad Vilbel
EGRIMA HOLDING GmbH & Co. KG, Düsseldorf
HSBC NF China Real Estate GmbH & Co. KG, Düsseldorf
KOKI Technik Holding GmbH, Konstanz
Polskie Towarzystwo Ubezpieczen S.A., Warsaw, Poland
Reum-Beteiligungs GmbH, Hardheim
ROLAND Rechtsschutz-Versicherungs-AG, Cologne
RREEF European Feeder GmbH & Co. Value Added Fund I KG, Eschborn
TRIFORUM Verwaltung GmbH & Co. Objekt Neu-Isenburg III KG, Pöcking
W. Classen GmbH & Co. KG, Kaisersesch
25.00
25.00
24.82
45.00
41.67
25.06
50.10
31.25
25.10
32.26
94.00
20.00
93
List of holdings pursuant to section 313(2) No. 4 of the German Commercial Code (HGB) –
subsidiaries
€ thousand
A&O Vertriebs AG, Oldenburg
A.S.I. Wirtschaftsberatung AG, Münster
Annex-Produkte Vertriebs GmbH, Cologne
Gothaer Kapitalverwaltungs-GmbH, Cologne
capiton MT Beteiligungsgesellschaft mbH, Berlin
capiton Pet Food GmbH, Berlin
Classen Finanz GmbH & Co. KG, Kaisersesch
CT GmbH, Aalen
Draiswerke GmbH i.L., Mannheim
FINGRO AG, Mannheim
FVM Consulting GmbH, Cologne
FVM Finanz- und Versicherungsmakler GmbH, Cologne
GBG-Consulting für betriebliche Altersversorgung GmbH,
Hamburg
GG-GRUNDFONDS Immobilienmanagement GmbH,
Cologne
GKC Gothaer Kunden-Service-Center GmbH, Cologne
Gorena GmbH, Husum
Gothaer Fonds GmbH, Cologne
Gothaer Fondsmanagement GmbH, Cologne
Zweite Gothaer Vermögensverwaltungs-AG, Cologne
Gothaer Substanzwertefonds - Immobilien International
GSC Gothaer Schaden-Service-Center GmbH, Berlin
Medico GmbH & Co. KG, Frankfurt a.M.
Munich Carlyle Beteiligungs GmbH, Grünwald
NYLCAP 2010 Co-Invest L.P., New York, USA
PE Feeder GmbH, Cologne
Pensus Pensionsmanagement GmbH, Göttingen
SG Sachwerte GmbH, Cologne
Zippel Netmarket GmbH, Elsdorf-Heppendorf
Interest*
%
Equity**
Profit or
loss **
100.00
100.00
100.00
100.00
65.42
72.69
71.43
54.68
99.28
100.00
95.00
95.00
653.9
3,717.8
199.9
184.0
–5,443.7
130.4
14.0
8,855.6
n.a.
461.0
–471.3
138.8
– 1,461.7
1,078.1
– 0.1
0.0
– 282.9
2,144.4
0.0
–1,393.3
n.a.
–1,055.7
– 1.4
4.1
100.00
138.4
231.1
100.00
100.00
100.00
100.00
100.00
100.00
n.a.
50.0
322.0
177.9
18.2
38.5
n.a.
0.0
–17.0
–22.1
– 6.8
– 0.4
99.90
100.00
99.89
98.00
100.00
100.00
100.00
100.00
55.00
10.0
684.6
23,888.4
85.3
$ 6,897.8
31.3
906.8
16.4
–6,786.7
0.0
0.0
– 3,200.0
4.0
0.0
2.9
201.0
–10.6
–53.7
94
List of holdings pursuant to section 313(2) No. 4 of the German Commercial Code (HGB) –
associates
€ thousand
Advanced Laser Separation International N.V., Beuningen,
Netherlands
b-onlife AG i.L., Cologne
Car-Garantie GmbH, Freiburg i. Brsg.
CarGarantie N.V., Apeldoorn
Compumedia Entwicklungs GmbH, Ratingen
Dr. Hannig GmbH, Kaisersesch
EGRIMA HOLDING Verwaltungsgesellschaft mbH,
Düsseldorf
Ensys AG, Frankfurt a. M.
Henke Pressedruck GmbH & Co. KG, Berlin
HLX Leuchten Beteiligungsgesellschaft mbh i. L., Laatzen
Hollmann Beteiligungsgesellschaft mbH, Hamburg
Innovationscapital Göttingen GmbH, Göttingen
Josef Brechmann GmbH, Schloss Holte-Stukenbrock
Josef Brechmann GmbH & Co. KG,
Schloss Holte-Stukenbrock
JP Morgan U.S. Real Estate Income and Growth
GmbH & CO. KG, Frankfurt a. M.
LaSalle Co-Investment Management Ltd., London, U.K.
Morgan Stanley Real Estate Fund IV, New York, USA
MT Misselbeck Technologies GmbH, Ingolstadt
Silkroutefinancial Group Limited, Nicosia, Cyprus
VOV Verwaltungsorganisation für Vermögensschadenhaftpflicht-Versicherungen für Mitglieder von Organen
juristischer Personen GmbH, Cologne
WAI S.C.A., SICAV- FIS, Luxembourg, Luxembourg
Wesser Informatik GmbH, Leinfelden-Echterdingen
Zippel Communications GmbH, Elsdorf-Heppendorf
Interest*
%
Equity**
Profit or
loss **
27.67
29.80
50.00
50.00
33.17
20.00
6,328.3
n.a.
7,109.5
5,029.8
n.a.
66.6
– 1,555.7
n.a.
7,041.4
254.7
n.a.
2.9
45.00
26.71
23.88
49.03
34.83
35.02
25.00
25.0
1,335.8
4,568.7
n.a.
n.a.
815.0
137.9
0.0
–9,060.9
2,364.1
n.a.
n.a.
–20.8
15.0
25.00
1,022.6
534.6
22.22
49.25
23.09
19.63
25.00
n.a.
1.4
n.a.
–3,533.4
$ 6,569.5
n.a.
0.0
n.a.
– 532.9
–$ 606.4
30.00
22.07
19.85
44.78
1,657.1
0.0
n.a.
n.a.
133.0
0.0
n.a.
n.a.
95
Accounting Policies
Description of accounting policies
Introduction
Financial statements are prepared on a going concern basis. Income and expenses are
recognized when they occur, i. e. they are reported in the periods to which they relate.
Settlement date accounting within the meaning of IAS 39 is used for purposes of recognition of financial assets. The respective companies are taken as cash-generating units
within the meaning of IAS 36 for purposes of recognition and measurement of impairment losses.
The application of accounting policies requires estimates and assumptions to be made
which impact on balance sheet positions, the consolidated statement of comprehensive income as well as contingent assets and liabilities. Estimates and assumptions are
used, in particular, for mathematical and statistical methods of valuing reserves such as
policy reserves, reserves for unpaid claims or provisions for pension benefits and similar obligations. However, they are also required for establishing the fair value of financial instruments as well as assessing deferred taxes and reserves for deferred premium
refunds. Estimates are made on the basis of reasonable, appropriate assumptions that
are verified on a yearly basis. Because estimates naturally involve a degree of uncertainty, actual values may differ from the estimates. Estimates may thus increase or
decrease net profit for the year. Further information is found in the descriptions of
accounting policies for the individual balance sheet positions.
New International Financial Reporting Standards
As a matter of principle, accounting policies are applied subject to the need for consistency. The following standards were applied in the financial year for the first time.
IFRS 3 –
Business Combinations
The revised version of IFRS 3 refines the accounting rules concerning business combinations by, amongst other things, changing the definition of a business combination,
extending the scope of application, clarifying the treatment of non-controlling shares
and modifying the rules on recognition and valuation of assets and liabilities in the
context of a business combination.
IAS 27 –
Consolidated and
Separate Financial
Statements
The amendments to IAS 27 regulate the treatment of changes in shareholdings for the
first time. Changes in shareholdings that do not affect the possibility of control should
be shown in consolidated financial statements as equity transactions; where changes in
shareholdings result in a loss of control, the remaining shares need to be revalued and
recognized at fair value through profit or loss. The rules governing the allocation of losses
have also been amended, with the result that non-controlling shares can now also be
recognized as negative items.
Annual Improvements
Projects 2008 and 2009
In the course of the 2008 and 2009 Annual Improvements Projects, minor amendments
were made to various IFRS standards and interpretations. The changes have no major
implications for the Gothaer Group.
The following standards, which are not mandatory for the reporting period, were not
applied ahead of schedule by the Gothaer Group.
96
IFRS 7 –
Financial Instruments:
Disclosures
The amendments to IFRS 7 relate to disclosures required on the transfer of financial
assets. The aim of the changes is to make the relationships between transferred financial assets and the corresponding financial liabilities more transparent and permit better assessment of the nature and extent of the risk of sustained engagement after financial assets are written off. The application of the amended IFRS 7 is mandatory for
financial years beginning on or after 1 July 2011. The changes have no major implications
for the disclosures of the Gothaer Group.
IFRS 9 –
Financial instruments
In approving IFRS 9, the IASB took the first step towards replacing IAS 39 Financial Instruments: Recognition and Measurement. The IASB’s aim hereby is to simplify the accounting regulations regarding financial instruments. IFRS 9 starts by classifying valuation
models. According to IFRS rules, the basis for the subsequent valuation of financial
instruments will in future need to be either fair value or amortized cost. Valuation at
amortized cost is permissible only for debt capital instruments that are held as part of a
business model geared to holding financial instruments as a source of contractual cash
flows and are based on contractual terms that result exclusively in predefined periodic
cash flows from redemption and interest payments on outstanding capital amounts.
As a matter of principle, all debt capital instruments that do not meet these requirements as well as all equity instruments need to be recognized at fair value in the statement of income. An exception to the rule of recognition at fair value in the statement of
income is made in the case of equity instruments that are not held for trading. The application of IFRS 9 is mandatory for financial years beginning after 1 January 2013;
earlier application is permissible.
For the application of IFRS 9, all financial instruments need to be studied and classified
according to the new valuation models. This will have a major impact on the Gothaer
consolidated statement of financial position – for one thing because recognition at fair
value directly in equity is no longer admissible under IFRS 9, for another because financial instruments that are currently carried at amortized cost will in future need to be
recognized at fair value in the statement of income.
In separate phases, the IASB is also currently revising the requirements relating to the
recognition of impairment and hedge accounting. After the discussions are completed,
the amended rules will be integrated into IFRS 9.
IAS 12
Income Taxes,
Deferred Taxes
The amendment of IAS 12 makes it clear that, in principle, temporary tax differences on
real estate held as an investment are reversed on the sale of the asset. The application
of the amended IFRS 12 is mandatory for financial years beginning on or after 1 July 2012.
IAS 24 –
Related party
disclosures
The revision of IAS 24 clarifies the definition of a related party. Application of the revised
version of IAS 24 is mandatory for financial years beginning after 1 January 2011. Earlier
application is permissible. The amendments have no effect on the disclosures of the
Gothaer Group.
97
Annual Improvements
Projects 2010
In the course of the 2010 Annual Improvements Project, minor amendments were made
to various IFRS standards as well as to IFRIC Interpretation 13 to eliminate inconsistencies and clarify formulations. Application of the amendments is mandatory for financial
years beginning on or after 1 July 2010. The changes have no major implications for the
Gothaer Group.
IFRIC 14 –
The Limit on a Defined
Benefit Asset, Minimum
Funding Requirements
and their Interaction
IFRIC Interpretation 14 contains accounting rules for defined benefit pension plans in
cases where existing plan assets exceed pension commitments. The amendment allows
entities to recognize voluntary prepayments for mandatory minimum funding contributions as an asset. Application of the amended IFRIC 14 is mandatory for financial years
beginning on or after 1 January 2011. The changes do not affect the Gothaer Group.
While IAS 24 and IFRIC 14 have been endorsed by the EU and incorporated into European law, IFRS 7, IFRS 9, IAS 12 and the Annual Improvements Project 2010 have not yet
received such approval.
Changes in accounting policies as well as accounting errors and reclassifications
Under the rules of IAS 8, changes in accounting policies as well as accounting errors are
required to be corrected by retrospective adjustment. In the 2009 financial statements,
procedural errors occurred in the calculation of deferred reserves for premium refunds
on subsidiaries’ retained earnings as well as in the elimination of intercompany profit.
The latter exclusively affected securities that were reclassified for valuation as loans
after having been categorized in prior years as available-for-sale investments- and
especially treatment of the separate revenue reserves associated with such reclassification. In addition, an adjustment was made to the reporting period of a special fund.
The alterations were implemented as indicated below.
98
Consolidated statement
of financial position
€ million
Assets
31 Dec 2009
Adjustment
IAS 8
Annual
Report 2009
Annual
Report 2010
E. Receivables
II. Other receivables
630.6
– 6.4
624.2
J. Tax assets
II. from deferred taxes
360.4
0.2
360.6
€ million
Equity and Liabilities
31 Dec 2009
Adjustment
IAS 8
Annual
Report 2009
A. Equity
II. Other reserves
III. Consolidated net profit for the year attributable
to shareholders of the parent company
B. Gross underwriting reserves
Consolidated statement
of comprehensive income
31 Dec 2009
Annual
Report 2010
22.5
– 3.1
19.4
74.6
1.8
76.4
1,781.8
–4.8
1,777.0
€ million
Statement of income
2009
Adjustment
IAS 8
Annual
Report 2009
8. Policyholder benefits
a) Gross
13. Taxes on income
14. Net profit for the year
of which attributable to shareholders of the
parent company
31 Dec 2009
2009
Annual
Report 2010
671.4
– 6.4
665.0
3,598.6
– 7.8
3,590.8
– 35.7
– 0.4
– 36.1
76.3
1.7
78.0
74.6
1.7
1.8
– 0.1
76.4
1.6
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Accounting policies of different items
Intangible assets
In the case of intangible assets, a distinction is made between goodwill and other intangible assets.
Goodwill is recognized under intangible assets in the consolidated financial statements
upon first-time consolidation if the cost of an acquisition exceeds the proportionate
share of the equity acquired after the release of hidden reserves. Good-will is regularly
tested for impairment within the meaning of IAS 36 (impairment only approach).
For the purpose of impairment testing, the book values of the companies, including the
goodwill allocated to the companies, are set against the relevant recoverable amount.
Impairment occurs where the estimated value in use does not exceed the cash value of
the anticipated payment flows.
The recoverable amount is based on fair value, which is also the value in use, less costs
to sell. If no direct market prices can be observed, valuation is normally by the capitalized earnings value method. Recoverable value is calculated by suitable valuation methods on the basis of assumptions made. In particular, the assumptions include anticipated future business results as well as the choice of planning horizons, discount rates
and capitalization requirements. Because of the difficulty of predicting business results
that lie far in the future, the long-term, sustainable earnings of the unit need to be estimated.
Because estimates of amounts that have not yet been generated are fraught with uncertainty, additional plausibility tests are performed. Here, sensitivity analyses are
conducted on discount rates or the main value drivers of the business plan, thus establishing which assumptions are appropriate in which areas. A check is also run on marketbased transaction-related multiples, if the latter are available. These methods are
applied in the absence of information on comparative market values.
Where impairment is established, i.e. where book value is not classed as recoverable,
depreciation is effected on good-will. The write-down is recognized under other
expenses. Negative goodwill is accounted for in the same item as positive goodwill. In
the year of acquisition, it is released with direct recognition through profit or loss.
Appreciation is recognized under other income.
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Other intangible assets include purchased as well as internally generated software.
All internally generated intangible assets meet the requirements of IAS 38. They are
recognized at cost less any impairment losses and amortized over their useful lives
(3 to 10 years) by the straight-line method. Other intangible assets are also regularly
tested for impairment in line with IAS 36 and impairment losses are recorded if necessary. Write-downs are reported in the statement of income and, in the case of an insurance company, spread over investment expenses, policyholder benefits and underwriting expenses. Where write-downs result from a non-insurance company, they are
reported in other expenses.
Tangible assets
Property, plant and equipment held for own use are shown under tangible assets. These
assets are carried at amortized cost. We refer to the comments on “investment property” for information on regular depreciation of buildings held for own use based on the
component approach. Other tangible assets are normally subjected to straight-line
depreciation over a useful life of 3 to 13 years. Tangible assets are also regularly tested
for impairment within the meaning of IAS 36. In the event of impairment, the carrying
amount of impaired tangible assets is reduced to the recoverable amount. Where
reasons leading to an impairment loss in the past no longer apply, the carrying amount
of the asset is increased to a maximum of amortized cost.
Scheduled depreciation and write-downs are also recognized in the statement of income
as are write-ups. In the case of an insurance company, they are spread over investment
expenses, policyholder benefits and underwriting expenses. Where they relate to a noninsurance company, depreciation and write-downs are reported in other expenses and
write-ups in other income.
Investments
Investment property
Investment property is recognized in accordance with IAS 40 at cost less accumulated
depreciation and any accumulated impairment losses. The rate of scheduled depreciation is determined by the component approach, whereby buildings are differentiated by
components and depreciated on a straight-line basis over a useful life of 10 to 80 years
depending on building class. In the case of permanent impairment, non-scheduled
depreciation is applied to the recoverable amount, which is the lower of fair value less
disposal costs or value in use. Scheduled and non-scheduled depreciation is shown in
the statement of income under investment result.
Subsequent acquisition or production costs are recognized as assets and depreciated
according to the rules described above if they are significant and qualify for recognition
under IAS 40. The fair values of properties are disclosed in the notes. Fair values are
determined by external evaluators based on the Valuation Ordinance (Wertermittlungsverordnung) and the Valuation Guidelines (Wertermittlungsrichtlinien). In general,
the capitalized earnings value approach is employed.
101
Shares in affiliated and
associated companies
Shares in non-consolidated majority-owned subsidiaries are recognized under investments in affiliated companies. They are carried at fair value in the “available for sale”
category. In the case of listed shares, the prices as of the reporting date are used; in
other cases, third-party valuations are used or carrying amounts determined using the
capitalized earnings value approach. Calculation of the capitalized earnings value is
based on the latest financial projections approved by the management, which normally
have a planning horizon of 3 to 5 years. For the period beyond the detailed planning
horizon, a detailed analysis of past experience is used to establish a reasonable going
concern value that is extrapolated into the future based on growth assumptions appropriate for the market. For parts of the property holding companies, carrying amounts are
also determined based on the net asset value.
Changes in fair value are recognized in equity through other reserves after any allocation
to reserves for deferred premium refunds and after deduction of deferred taxes. In the
event of permanent impairment, however, the carrying amount is reduced to fair value
and the loss recognized in the statement of income. After an asset is written down, any
further decrease in fair value – even if impairment is insignificant or temporary – is
recorded as impairment loss in the statement of income. If the reasons for earlier
impairment no longer exist, the recovery in value needs to be recognized directly in
equity.
Shares in associated companies with a significant influence are shown in the consolidated financial statements at equity, i. e., at the proportionate share of equity. Income
resulting from increases or expense resulting from decreases in the proportionate share
is then shown under investment result. The proportionate share of equity is determined
based on the most recent annual financial statements available. For reasons of materiality, the carrying amounts in the financial statements of associated companies are
retained and not adapted to the uniform accounting policies of the Group.
Associated companies over which no significant influence can be exercised are carried
at fair value as investments available for sale. In most cases, the entities in question
are property investment companies in which Gothaer has a stake of less than 20 %. The
same accounting and valuation rules are used here as for non-consolidated shares in
affiliated companies.
The net yield on shares in affiliated and associated companies comprise current income,
any gains or losses on disposals and, where applicable, impairment losses. Current
income includes dividend payments from affiliated and associated companies on the
one hand as well as income realized upon consolidation of associated companies on
the other hand. Quantitative statements on net yields are made in the notes to the
consolidated financial statements on the investment result.
102
Investments held
to maturity
Investments held to maturity include bearer bonds and other loans that the Company
intends and is able to hold to maturity. These investments are carried at amortized cost.
Any premiums or discounts are spread over the entire term using the effective interest
method. Impairment tests are also carried out as of each reporting date. In the event it
is determined that permanent impairment is likely, the carrying amount is reduced to
the present value of expected future cash flows. Where impairment from the past is
reduced, the carrying amount is increased up to a maximum of initial cost less accumulated amortization. Both impairment losses and reversals are shown in the statement of
comprehensive income under investment result. The fair values of investments held to
maturity are shown in the notes to the consolidated financial statements on the assets
side of the consolidated statement of financial position. In the case of publicly traded
financial instruments, the trading price is taken as fair value. In the case of financial
instruments that are not publicly traded, fair value is determined with the help of yield
curves, discounted cash flow methods or prices obtained from outside valuation
services.
The net yield on investments held to maturity includes current income, any gains or
losses on disposals and, where applicable, impairment losses or reversals. Current
income contains amortization income or expense as well as interest income. Writedowns and write-ups include translation differences in the case of securities denominated in foreign currencies as well as impairment losses and reversals. Quantitative
statements on net yields are made in the notes to the consolidated financial statements
on the investment result. In 2009, the fair value of subordinate bank and insurance
company bearer bonds for which there was no longer an active market in the wake of the
financial crisis was ascertained by the use of an internal valuation model. When markets returned to normal, the model pricing system ceased to be used. Now, fair value is
determined for all subordinate bearer bonds exclusively on the basis of market prices at
balance sheet date, which are supplied by corresponding market information systems.
Loans
Loans include not only mortgage loans, policy loans and other loans but also fixedincome securities that are not listed on an active market. An active market is present
where prices are constantly available and confirmed by regular transactions. As in the
case of investments held to maturity, loans are recognized at amortized cost calculated
by the effective interest method. Impairment tests are also carried out at each reporting
date. The treatment of impairment losses and reversals is the same as that used for
investments held to maturity. The fair value of loans is also disclosed in the notes to the
consolidated financial statements. Fair values are established by the same methods
used for investments held to maturity. The components of the net yield on loans also
correspond to those of the net yield on investments held to maturity.
103
Investments available
for sale
Investments available for sale include stocks, investment fund certificates, other nonfixed-income securities and other shares. In addition, bearer bonds, other fixed-income
securities, registered bonds, promissory notes and loans that are not carried as loans or
investments held to maturity are disclosed under this heading.
These items are recognized at fair value. In the case of publicly traded financial instruments, the trading price is taken as fair value. In the case of financial instruments that
are not publicly traded, fair value is determined with the help of yield curves, discounted
cash flow methods or prices obtained from outside valuation services.
If appropriate, temporary changes in fair value are transferred directly to equity under
other reserves after any allocation to reserves for deferred premium refunds and deduction of deferred taxes. In the case of likely permanent impairment, on the other hand, the
carrying amount is reduced to fair value and the loss shown in the statement of income.
In the case of equity instruments that have been amortized and the loss recognized in
the statement of income, any subsequent decrease in fair value is recognized as impairment loss in the statement of income, even if the impairment is insignificant or temporary. If the reasons for an impairment loss taken in the past no longer apply, the value
of equity instruments is increased directly in equity. In the case of fixed-income securities, impairment losses are reversed in an amount of up to a maximum of cost less
accumulated amortization. Gains and losses on disposals are determined based on the
difference between the proceeds from the disposal and cost or, as the case may be, cost
less accumulated amortization and any impairment losses.
The net yield on investments available for sale includes current income, gains or losses
on disposals and any impairment losses or reversals. Current income contains dividend
payments from non-fixed-income investments and interest from fixed-income securities,
including amortization income or expense. Write-downs and write-ups also include
translation differences in the case of fixed-income securities denominated in foreign
currencies as well as impairment losses and reversals. Quantitative statements on net
yields are made in the notes to the consolidated financial statements on the investment
result.
Investments measured
at fair value through
profit or loss
104
In addition to investments held for trading, this item includes investments by designation. Investments may be classed for recognition at fair value through profit or loss
only at the time of acquisition. The trading portfolios are reserved exclusively for derivative financial instruments. The by-designation subcategory includes an index certificate as well as a private equity vehicle. Investments in the two subcategories are
recognized at fair value, which is obtained based on stock exchange prices or other
valuation (use of external prices or option price models) as of the reporting date. Only
financial instruments with a positive fair value are recognized on the assets side of the
statement of financial position. Financial instruments with a negative fair value are
recognized under liabilities on the equity and liabilities side of the statement.
Changes in the fair value of financial instruments – both those with a positive value and
those with a negative one – are recognized in the statement of income as investment
result. Gains and losses on disposals are determined based on the difference between
the proceeds from the disposal and the fair value at the last balance sheet date.
The net yield on investments measured at fair value through profit or loss includes
current income, gains or losses on disposals and any impairment losses or reversals.
Current income shows mainly interest on income of fixed-income securities. Changes in
fair value are reflected in impairment losses or reversals. Quantitative statements on
net yields are made in the notes to the consolidated financial statements on the investment result
Other investments
Other investments include deposits with financial institutions, deposits with ceding
under-takings and those financial instruments that cannot be assigned to any other
heading. Pursuant to IAS 39, they are recognized as loans at (amortized) cost or at
nominal value. The fair value of other investments generally corresponds to the carrying
amount. The net yield on other Investments includes current income, any gains or losses
on disposals and, where applicable, any impairment losses or reversals.
Impairment
At every balance sheet date, a check is run to verify whether there are substantial
objective indications of impairment of financial instruments or groups of financial
instruments. In the Gothaer Group, shares and participations that are classed as investments available for sale are regarded as impaired where fair value has been significantly
below cost or below it for an uninterrupted period of nine months up to the balance
sheet date. In the case of fixed-income securities, which are recognized as investments
held to maturity, loans or investments available for sale, permanent impairment is assumed in the event of significant changes in creditworthiness. This could occur in the
wake of a significant deterioration of rating or a sharp drop in fair value below cost.
Impairment is recognized directly in the positions affected, without the use of value
adjustment accounts.
105
Investments held for unit-linked life insurance policies
Investments held to cover unit- or index-linked life insurance are shown separately from
other investments. They are recognized at fair value. Changes in value affect neither net
profit for the year nor equity since the corresponding underwriting reserve changes
commensurately.
Receivables
Receivables include receivables from primary insurance business, accounts receivable
in connection with reinsurance business, deferred interest and rent and receivables from
affiliated and associated companies. Receivables are recognized pursuant to IAS 39 as
loans at nominal value less any necessary write-offs. The fair value of receivables
generally corresponds to the carrying amount.
Cash and cash equivalents
Cash and cash equivalents are recognized pursuant to IAS 39 as loans at amortized cost.
The fair value is generally the carrying amount.
Deferred acquisition costs
FAS 60 defines acquisition costs as all variable costs that are directly incurred in connection with the acquisition or extension of insurance contracts. Such costs include
commissions for intermediaries as well as fees for medical examinations. Acquisition
costs are capitalized and amortized on a systematic basis.
In the area of property/casualty insurance, acquisition costs incurred in connection with
new contracts are amortized on a straight-line basis over the legal term of the contract
of up to three years.
In the case of life insurance policies recognized pursuant to FAS 60, acquisition costs are
amortized in proportion to recognition of premium income. Annual amortization is
determined on the same basis as for actuarial calculations used to determine policy
reserves. In the case of life insurance contracts that fall under FAS 97, acquisition costs
are amortized in proportion to the emergence of estimated profits. Estimates of future
profits are based on assumptions as regards the development of biometric risks, cancellations, investment income and bonuses due to policyholders. Assumptions are regularly
examined to determine whether they are appropriate. If necessary, the bases used
for calculation are revised and deferred acquisition costs are increased or reversed
accordingly.
106
In the case of health insurance, acquisition costs are amortized over the term of the
contract. Amortization is determined on the actuarial basis used to determine policy
reserves. In the case of short-term health insurance contracts with unearned premiums,
amortization is proportional to recognition of premiums in the statement of income.
Deferred acquisition costs are assessed for impairment as of each reporting date by
carrying out a test of recoverability.
Taxes
Tax assets or tax debts that need to be recognized under national tax laws are included
in the current taxes.
In deferred taxes temporary differences between carrying amounts in the IFRS balance
sheet and the tax base are accounted for by recognition of deferred tax assets or liabilities. Deferred taxes may also result from the carryforward of unused tax losses or
from consolidation issues. Deferred tax assets are recognized only if an offset with future
taxable profit is probable. The recoverability of deferred tax assets is reviewed as of each
reporting date pursuant to IAS 12.56. The tax rate is determined based on the respective
tax situation of individual items or that of the Group companies.
Changes in tax rates are taken into account as soon as they are enacted. Deferred taxes
are to be consistently recognized in connection with the business transactions from
which they result. That means that transactions with an impact of profit or loss result in
recognition of deferred taxes in the statement of income, and transactions with no
impact on profit or loss result in recognition of deferred taxes directly in equity.
Other assets
All other assets are shown at cost less accumulated depreciation or at nominal value
less any necessary impairment losses.
Equity
Equity is subdivided in the four positions revenue reserves, other reserves, consolidated
profit for the year and minority interests. Other reserves mainly include unrealized gains
and losses on investments available for sale after allocation to reserves for deferred
premium refunds and adjustment for deferred taxes and the effects of consolidation.
Minority interests include the prorated equity of subsidiaries that do not directly or
indirectly belong 100 % to the Gothaer Group.
107
Underwriting reserves
Gross underwriting reserves are shown under liabilities. The reinsurers’ shares are shown
on the assets side. Reinsurers’ shares are also recognized separately in the statement
of income. The value of reinsurers’ shares of underwriting reserves is established based
on individual reinsurance treaties.
Unearned premiums
Unearned premiums from property/casualty insurance and short-term health insurance
policies are calculated on an individual and day-by-day basis. No expenses are deducted
(reduction in unearned premiums as a function of a specific expense ratio for commissions and administrative expense) since unearned premiums and deferred acquisition
costs are recognized simultaneously. Unearned premiums are not recognized in the case
of long-term life and health insurance contracts since the policy reserve is determined
as a function of premium maturity.
Policy reserves
The provisions of FAS 60 pertaining to long-duration insurance contracts provide the
basis for recognition and measurement of policy reserves in the area of life and health
insurance. On the other hand, life insurance policies providing benefits that are determined by the performance of the investments covering the policyholder account are
carried pursuant to FAS 97. In the case of insurance contracts that primarily involve the
transfer of financial risks, the provisions of IAS 39 are applied.
Policy reserves for all life insurance contracts carried pursuant to FAS 60 are estimated
on an individual basis using the prospective method. Taking into account adequate
safety margins, accounting assumptions are based on expected investment yields,
mortality, cancellation frequency as well as claims settlement expenses and periods
during which no premiums are paid. The estimates include the results of the Company’s
own observations as well as external data. The policy reserve contains bonuses already
allocated and declared to policyholders plus those components of premiums that may
not be recognized in the statement of income until after the reporting date.
Policy reserves for unit- and index-linked life insurance are determined in compliance
with FAS 97 and mainly include payments received from policyholders, withdrawals to
cover risks and expenses as well as changes in the market value of the corresponding
investments. Those components of the policy reserve that correspond to the market
values of the investments assigned to these contracts are disclosed separately. In the
case of contracts recognized pursuant to IAS 39, policy reserves are determined based
on the corresponding cash flows using the effective interest method.
108
Policy reserves for health insurance contracts are determined based on the difference
between the present value of future benefits including claims settlement expenses and
the present value of estimated premium income. The reserves are determined based on
current actuarial assumptions and adequate safety margins using the prospective unlocking approach. This enables insurers to adjust premiums. The assumptions made at
the beginning of a contract are retained until the premiums for that contract are adjusted.
The assumptions then remain in place until the next adjustment. Additional reserves
are formed for obligations in the following year resulting from transfers.
Reserves for
unpaid claims
Reserves for unpaid claims include liabilities in connection with insurance policies of
uncertain amount or timing. In the area of property/casualty insurance, the future development of claims is estimated pursuant to FAS 60 based on past claims experience using
recognized statistical methods and taking into account current or anticipated parameters and the ultimate cost of settlement is calculated per year along with the cost of
claims settlement. This provides the basis for determination of the required loss
reserves. For more realistic estimation, some of the modelling in the area of hyperinflation was adjusted in the financial year.
For reasons of materiality, a reserve requirement in line with the commercial balance
sheet was assumed for individual lines of property/casualty insurance. With the exception of reserves for annuities in connection with property/casualty insurance, loss
reserves are not discounted. For technical reasons, estimated liabilities may differ from
actual expenses.
In the area of life insurance, reserves for unpaid claims – unless covered by settlement
with lead managers in the case of group contracts – are estimated for each individual
claim based on experience as of 31 December. In the case of claims under supplementary occupational disability insurance policies that have not yet been settled, reserves
are established overall in an amount based on past experience. Reserves for losses
incurred but not yet reported are established for insured events occurring after the
general estimate is made and before 31 December through estimation of the amounts at
risk on the basis of the individual claims, i.e. essentially the difference between benefits to be paid and available cover. General reserves in an amount based on past experience are established for mortalities occurring during the financial year but not
reported.
In the area of health insurance, reserves for unpaid claims are estimated with the help
of a statistical approximation method. The estimate is based on the percentage of claims
incurred as of the reporting date and settled as of the date of establishment of the
reserves and a factor derived from experience in the past three financial years.
Separate estimates are made for the previous year and earlier financial years.
109
Other underwriting
reserves
Other underwriting reserves mainly include reserves for premium refunds.
Reserves for premium refunds in the area of life and health insurance set aside all
amounts to be used for payment of bonuses to policyholders in compliance with national or regulatory requirements, legal provisions or contractual conditions. Reserves for
premium refunds, including deferred premium refunds, comply with the definition of
discretionary participation features pursuant to IFRS 4.
Since 2008, the new Minimum Premium Refund Ordinance (MindZV) has been applied.
Based on this, policyholders participate in the result sources of investment result, risk
income and other income with 90 %, 75 % or 50 %, respectively, when the respective
results are positive. It can be estimated that based on this ordinance the minimum participation of the policyholders in the total surpluses continues to be approx. 90 % on
average. Discretionary payments of bonuses that are not already included in the policy
reserves are carried as liabilities under reserves for premium refunds and liabilities from
direct written insurance business.
In the case of health insurance modelled on life insurance, the German Ordinance on
the Determination and Distribution of Interest and Profit in Health Insurance (ÜbschV)
requires that 80 % of profit determined in accordance with section 4(1) ÜbschV be transferred to reserves for performance-related premium refunds, whereby the minimum
amount transferred is to be reduced by the surplus interest already credited pursuant to
section 12a(1) of the German Insurance Supervision Act (VAG). In the case of private compulsory long-term care insurance, 80 % of profit determined in accordance with section
4(1a) ÜbschV is to be transferred to reserves for performance-related premium refunds,
whereby the minimum amount transferred is to be reduced by the amount transferred to
non-performance-related premium refunds for group insurance contracts. In addition to
performance-related premium refunds, non-performance-related premium refunds also
exist in the case of health insurance that result in particular from amounts from the area
of long-term care insurance and section 12a(3) VAG.
Reserves are also established pursuant to sections 12(4a) VAG (legal supplement) and
12a(2) VAG in the case of health insurance. These reserves are used to permit lower
premiums in the future and are therefore included as a component of reserves for
premium refunds.
In the event of changes in the value of the assets or liabilities of life and health insurers
as a result of differences between the German Commercial Code (HGB) and IFRS, such
differences are taken into account in the reserve for deferred premium refunds in an
amount estimated to be due to policyholders upon realization. The assumptions made
for estimates in policyholder profit-sharing models have changed, notably due to sustained changes in interest rate conditions and increased solvency requirements for
insurance companies. This resulted in an adjustment to the rate for the deferred reserve
for premium refunds in the financial year. The adjustment was made prospectively. The
change in estimated values produced an income effect of € 18.5 million in the year under
review as a result of revaluations due to differences between HGB and IFRS in prior years.
Because future revaluation differences are not known, the impacts of this change on
future years are not quantifiable.
110
Provisions for contingent losses are established for some insurance portfolios in property/casualty following the premium deficiency test. Equalization reserves established
pursuant to the provisions of HGB are not considered liabilities and are therefore not
permissible under IAS 37.
Adequacy of
underwriting reserves
Application of IFRS 4 requires regular assessment of the adequacy of insurance liabilities (liability adequacy test).
In the area of property/casualty insurance, a so-called premium deficiency test is conducted pursuant to FAS 60 to establish whether future premiums and the corresponding
investment result of the relevant insurance portfolio are expected to cover the anticipated claims and costs. If it emerges that future income will not cover the anticipated
expenses, the reversal of deferred acquisition costs needs to be followed by the establishment of a provision for contingent losses calculated at the level of the line of
insurance.
The adequacy of life insurance underwriting reserves is assessed pursuant to FAS 60 by
means of what is referred to as loss recognition test. This involves estimation of future
cash flows, taking into account realistic estimates of mortality and other decrement probabilities as well as expense ratios. The cash flows are discounted at a rate commensurate with current interest expectations. The results of the loss recognition test show that
reserves and future revenues estimated on the basis of realistic assumptions currently
suffice to cover all contractual obligations.
The margins of safety included in the underlying assumptions for health insurance underwriting reserves are sufficiently high so that it is possible to dispense with assessment
of appropriateness of the liabilities.
Underwriting reserves for unit-linked life insurance
In addition to policy reserves, other underwriting reserves are also established here for
liabilities in connection with life insurance policies that transfer investment risk to
policyholders or provide index-linked benefits.
Pursuant to FAS 97, the amount stated for gross policy reserves is the same as the
amount stated for investments held for unit-linked life insurance policies.
Investments assigned to unit-linked life insurance are carried separately from those of
the Group. In this case unrealized gains and losses result in an increase or decrease in
the corresponding reserves. All gains on these investments accrue to policyholders, as
do all losses.
111
Provisions for pension benefits and similar obligations
Group companies for the most part use defined-benefit plans to provide pension benefits. Defined-benefit pension plans are accounted for pursuant to IAS 19 using the projected unit credit method and taking into account actuarial parameters. Calculation is
based on the use of current mortality tables, disability and fluctuation probability,
assumptions on increases in remuneration and annuities and a realistic discount rate.
Actuarial gains and losses result from differences between actual obligations and benefits paid and obligations and benefits anticipated based on actuarial assumptions as
well as from changes in actuarial assumptions. Actuarial gains and losses are accounted
for using the corridor method pursuant to IAS 19.92.
Other accruals
Other accruals and provisions are capitalized for current legal or de facto obligations
towards third parties arising from past events. Assigned values are based on the best
estimate of payments needed to meet the relevant obligation. Long-term accruals and
provisions are discounted if the interest effect is significant.
Liabilities
This item includes participation certificates, subordinate liabilities, bonds and loans,
deposits received from reinsurers and other liabilities. These liabilities are all recognized at repayable amounts or amortized cost. Investments held for trading with a negative fair value are also shown under this item.
Premiums
Earned premiums do not contain those components of premiums that may be recognized in the statement of income only after the reporting date. In property/casualty
insurance, premiums are essentially booked as income on a day-by-day basis over the
term of the insurance contract. Unearned premiums are calculated and deferred for each
individual contract. Premium income from short-term accident and health insurance
contracts is recorded on a pro rata basis over the term of each contract. In classical life
insurance and in long-term accident and health insurance contracts, premiums are
booked as earned when due. At the same time, reserves for anticipated benefits are
formed to spread profits over the term of the contracts.
In the case of life insurance products that primarily cover assignment of financial risk or
can be separated explicitly in insurance and savings components (e.g. unit-linked life
policies), savings components are deducted from the gross premiums written because
only income from the coverage of risks and costs may be recognized as earned premiums. In addition, a deduction is made from premiums to allow for a collective valuation
allowance. This takes account of payment default risk based on past experience.
112
Currency translation
The consolidated financial statements of the Gothaer Group are denominated in euros.
All companies whose accounts are included in the consolidated financial statements
denominate their financial statements in euros. Since our business is concentrated in
Germany, currency translation is of insignificant importance for our Group.
Monetary items in foreign currencies are translated at the exchange rate prevailing as of
the reporting date. Non-monetary items in foreign currencies that are carried at historical cost are translated at the exchange rate prevailing at the time of acquisition. Nonmonetary items in foreign currencies that are carried at fair value are translated at the
exchange rate at the time of valuation. Underwriting liabilities involving payment in foreign currencies are covered by funds in the same currency (congruent coverage) to the
extent possible due to the difficulty of estimating such uncertain liabilities.
Differences in connection with monetary financial instruments that result from translation of items in foreign currencies as of the reporting date at an exchange rate that
differs from that used for first-time recognition are shown in the statement of income.
Leasing agreements
Intangible assets and tangible assets are used under operating leases. In the case of
operating leases, assets are not recognized by the lessee since the lessor retains the
related benefits and risks of ownership. Lease payments are recognized as expense in
the financial year in which they occur.
Finance leases exist in the area of EDP hardware. Assets used under finance leases are
recognized as assets by the lessee. Lease payments due at future dates are recognized
as liabilities.
Other information
Due to the presentation of amounts in millions of euro, rounding differences may occur
in tables.
Comments on the information on insurance policies required under IFRS 4 as well as
information on financial instruments required under IFRS 7 are provided in the risk report
within the management report where they are not provided in the accounting policies
and notes to the consolidated financial statements. Classification for the presentation
of information required in IFRS 7 is based on the accounting categories contained in
IAS 39.
113
Notes to the Consolidated Statement of Financial Position –
Assets
[1]
Goodwill
€ million
Breakdown by company
2010
2009
CG Car-Garantie Versicherungs-AG
Gothaer Dritte Kapitalbeteiligungsgesellschaft mbH
Gothaer Systems GmbH
Gothaer Invest- und FinanzService GmbH
13.2
0.2
5.9
2.5
3.3
13.2
0.2
5.9
2.5
3.3
Balance as of 31 Dec.
Accumulated amortization as of 31 Dec.
Gross as of 31 Dec.
25.1
8.7
33.8
25.1
8.7
33.8
Impairment test method
114
Model factors
Assumptions
Management approach
Capitalized earnings value approach
Planning horizon
Detail planning over 3–5 years
Extrapolation of past experience
by detailed analysis
Future cash flows
for detail planning
moderately rising revenues, depending on field of business
moderately rising stock markets
slow rise of interest rates
Extrapolation growth rates
0.6 %– 1.0%
Discount rate
Cost of equity capital determined by capital asset pricing model
Use of a peer group of international
primary insurance companies
7.8 %– 8.6 %
[2]
Other intangible assets
€ million
Developments in the financial year
Internally
generated
2010
2009
2010
2009
2010
2009
192.2
174.6
276.1
291.7
468.3
466.3
130.6
61.6
119.3
55.3
202.0
74.1
219.3
72.4
332.6
135.7
338.6
127.7
Additions
Disposals
Scheduled amortization
17.9
0.0
13.4
17.6
0.0
11.3
29.9
4.1
12.1
25.9
6.5
17.7
47.8
4.1
25.5
43.5
6.5
29.0
Accumulated amortization
as of 31 Dec.
Gross as of 31 Dec.
66.1
61.6
87.8
74.1
153.9
135.7
143.9
210.0
130.6
192.2
206.0
293.8
202.0
276.1
349.9
503.8
332.6
468.3
Gross as of 1 Jan.
Accumulated amortization
as of 1 Jan.
Balance as of 1 Jan.
[3]
Tangible assets
Total
Purchased
€ million
Gross as of 1 Jan.
Accumulated depreciation as of 1 Jan.
Additions
Disposals
Accumulated depreciation as of 31 Dec.
Gross as of 31 Dec.
2010
2009
480.1
285.1
195.1
503.6
295.9
207.7
6.9
4.3
11.6
6.5
3.9
15.2
186.1
274.0
460.1
195.1
285.1
480.1
The balance consists of € 159.7 million (PY: € 162.9 million) for self-occupied property
and € 26.4 million (PY: € 32.2 million) for tangible assets.
The fair value of self-occupied property comes to € 198.5 million (PY: € 199.5million).
115
[4]
Investment property
in € million
Gross as of 1 Jan.
Accumulated depreciation as of 1 Jan.
2010
2009
193.4
103.7
89.7
198.8
105.9
92.9
0.0
1.8
1.9
2.6
0.6
2.0
0.4
1.9
3.2
0.3
84.0
107.2
191.2
89.7
103.7
193.4
Additions
Disposals
Impairment
Reversals
Accumulated depreciation as of 31 Dec.
Gross as of 31 Dec.
The fair value of investment property comes to € 119.4 million (PY: € 126.5 million).
Operating expenses directly attributable to rented property, including repairs and maintenance, come to € 5.1 million (PY: € 6.9 million).
[5]
Twelve (PY: eleven) associated companies were carried at equity in the amount of € 115.0
million (PY: € 70.2 million). Any negative consolidation differences are amortized directly
in the financial year in which they occur. No negative differences occurred in the financial
year 2010 or in the prior year. The fair value of the associated companies consolidated at
equity totalled € 510.5 million (PY: € 378.1 million).
Associated companies
€ million
Financial information*
Assets
Consolidated
Investments
available for sale
Liabilities
Sales revenues
Profit
2010
2009
2010
2009
2010
2009
2010
2009
563.9
751.3
464.5
652.4
183.1
1,716.7
7.6
23.0
25.8
28.7
34.2
36.5
147.6
111.4
– 2.3
1.8
* The most recent financial statements acc. to HGB
Shares in affiliated
and associated
companies –
available for sale
116
Other affiliated and associated companies are not consolidated because they are of
insignificant economic importance. These interests are recognized as investments
available for sale at fair value. Unrealized gains and losses were shown under equity after
any deduction of deferred taxes and reserves for deferred premium refunds.
Shares in affiliated
and associated
companies –
available for sale
Amortized cost
Unrealized gains
Unrealized losses
Fair value
2010
2009
2010
2009
2010
2009
2010
2009
Affiliated
companies
558.6
444.8
143.0
78.8
0.1
1.0
701.5
522.6
Associated
companies
906.0
870.5
102.4
73.8
2.7
6.9
1,005.7
937.4
1,464.6
1,315.3
245.4
152.6
2.8
7.9
1,707.2
1,460.0
Total
[6]
Investments held
to maturity
€ million
Breakdown by type of company
€ million
Breakdown by type of investment
Amortized cost
Bearer bonds
Other loans
Total
Unrealized gains
Unrealized losses
Fair value
2010
2009
2010
2009
2010
2009
2010
2009
2,132.2
2,239.9
55.4
44.8
126.5
124.0
2,061.1
2,160.7
40.9
40.8
0.0
0.0
2.4
1.7
38.5
39.1
2,173.1
2,280.7
55.4
44.8
128.9
125.7
2,099.6
2,199.8
€ million
Breakdown by residual term
Amortized cost
Up to 1 year
1 to 2 years
2 to 3 years
3 to 4 years
4 to 5 years
5 to 10 years
After 10 years
Total
Fair value
2010
2009
2010
2009
227.4
135.1
377.9
245.0
674.0
439.8
73.9
80.8
239.9
146.4
388.6
250.6
1,038.2
136.2
227.8
136.1
378.2
232.0
642.7
420.5
62.3
80.0
245.2
143.9
387.3
242.9
986.3
114.2
2,173.1
2,280.7
2,099.6
2,199.8
117
Investments held
to maturity
€ million
Amortized cost
Fair value
2010
2009
2010
2009
AAA
AA
A
BBB
BB
B
CCC and lower
Non-rated
0.0
110.2
1,076.3
740.0
228.0
11.0
6.7
0.9
0.0
153.4
1,149.7
748.9
215.5
7.2
5.1
0.9
0.0
113.2
1,076.5
691.8
199.7
11.0
6.7
0.7
0.0
143.9
1,143.9
709.2
189.9
6.9
5.1
0.9
Total
2,173.1
2,280.7
2,099.7
2,199.8
€ million
Impairment
118
2010
2009
Amortized cost before impairment
Impairment
Due to significant change in creditworthiness
Due to significant decrease in fair value
31.6
199.3
0.0
13.4
0.9
18.9
Amortized cost after impairment
18.1
179.5
[7]
Loans
€ million
Amortized cost
Unrealized gains
Unrealized losses
Fair value
2010
2009
2010
2009
2010
2009
2010
2009
374.0
420.5
18.4
13.2
3.8
0.0
388.6
433.7
Loans and advance
payments on
insurance policies
62.6
60.5
11.9
12.4
0.0
0.0
74.5
72.9
Loans to affiliated
companies
21.5
21.1
0.0
0.0
0.0
0.0
21.5
21.1
Loans to
associated
companies
36.9
31.2
0.0
0.0
0.0
0.0
36.9
31.2
Other loans
38.1
34.7
0.7
0.5
2.1
2.1
36.6
33.1
Bearer bonds
1,069.4
1,111.1
17.7
83.4
92.0
69.9
995.2
1,124.6
Registered
bonds
1,928.8
2,088.3
28.8
45.4
31.6
29.6
1,926.0
2,104.1
Promissory
notes
3,161.3
3,227.3
64.0
34.0
126.4
88.8
3,098.9
3,172.5
Total
6,692.5
6,994.7
141.5
188.9
255.8
190.4
6,578.2
6,993.2
Mortgage loans
Loans to associated companies include € 35.5 million (PY: € 22.5 million) in loans to
consolidated companies and € 1.4 million (PY: € 8.7 million) in loans to non-consolidated
companies.
€ million
Amortized cost
Fair value
2010
2009
2010
2009
Up to 1 year
1 to 2 years
2 to 3 years
3 to 4 years
4 to 5 years
5 to 10 years
After 10 years
847.3
536.1
583.0
603.8
706.5
1,098.0
2,317.8
1,134.7
728.0
818.8
501.9
653.8
1,659.7
1,497.8
846.1
539.6
586.1
602.9
678.4
1,080.5
2,244.6
1,113.6
733.3
806.7
514.9
675.6
1,666.4
1,482.7
Total
6,692.5
6,994.7
6,578.2
6,993.2
119
Loans
€ million
Amortized cost
Fair value
2010
2009
2010
2009
AAA
AA
A
BBB
BB
B
CCC and lower
Non-rated
2,029.5
1,628.9
1,225.5
828.9
254.6
74.2
61.1
589.8
2,237.6
1,855.1
1,392.7
590.5
213.6
43.7
76.0
585.5
2,017.4
1,645.1
1,217.2
746.0
222.9
70.4
42.2
617.0
2,257.8
1,841.9
1,376.1
605.1
212.6
27.6
55.9
616.2
Total
6,692.5
6,994.7
6,578.2
6,993.2
€ million
Impairment
Reclassification
in accordance
with IAS 39.50
2010
2009
Impairment
79.2
99.3
3.7
9.8
0.1
2.4
65.8
96.8
No reclassification in accordance with IAS 39.50 was made in the financial year. In 2008
financial instruments available for sale with a fair value of € 1.03 billion were reclassified
as loans. These financial instruments had a carrying value, i. e. amortized costs of
€ 906.8 million (PY: € 936.1 million) at the end of the financial year and a fair value of
€ 835.7 million (PY: € 956.7 million), and income and expenses totalling € 30.5 million
(PY: € 105.4 million) was recorded in the statement of comprehensive income.
€ million
Change in fair value of reclassified investments
Without reclassification (shadow accounting)
Unrealized gains and losses
Realized gains and losses
2010
2009
5.1
59.7
107.6
0.4
The effective interest rates of the reclassified financial instruments was between 3.4 %
and 20.3 %.
120
Anticipated
cash flows
€ million
Payment times
Up to 1 year
1 to 2 years
2 to 3 years
3 to 4 years
4 to 5 years
5 to 10 years
Total
[8]
Investments
available for sale
2009
79.0
64.7
41.5
137.9
333.6
386.8
69.7
91.4
80.3
42.8
179.7
656.9
1.043.5
1.120.8
€ million
Amortized cost
Unrealized gains
Unrealized losses
Fair value
2010
2009
2010
2009
2010
2009
2010
2009
Non-fixed-income
securities
1,618.3
1,943.5
91.6
81.6
121.8
238.8
1,588.1
1,786.3
Fixed-income
securities
Bearer bonds
8,975.3
8,177.7
202.3
199.0
294.1
32.3
8,883.5
8,344.4
48.9
42.1
0.7
0.9
0.0
0.0
49.5
43.0
572.2
653.8
1.8
3.5
2.7
0.0
571.3
657.3
11,214.6 10,817.1
296.4
285.0
418.6
Registered bonds
Promissory
notes
Total
Investments
available for sale
2010
271.1 11,092.5 10,831.0
€ million
Amortized cost
Fair value
2010
2009
2010
2009
Up to 1 year
1 to 2 years
2 to 3 years
3 to 4 years
4 to 5 years
5 to 10 years
After 10 years
1,193.3
525.4
535.5
650.1
748.5
3,678.7
2,264.9
1,652.6
943.4
755.4
604.2
792.8
2,928.3
1,196.9
1,193.3
532.3
537.7
684.0
761.7
3,631.3
2,164.1
1,653.6
955.6
767.7
619.8
825.9
3,007.9
1,214.2
Total
9,596.4
8,873.6
9,504.4
9,044.7
121
Investments
available for sale
€ million
Amortized cost
Fair value
2010
2009
2010
2009
AAA
AA
A
BBB
BB
B
CCC and lower
Non-rated
4,165.5
2,005.3
1,490.5
1,042.7
261.2
163.5
6.2
461.5
4,777.3
1,521.5
837.9
738.0
157.9
117.3
8.0
715.7
4,212.6
1,949.1
1,468.1
979.5
256.0
170.6
4.0
464.5
4,830.8
1,549.6
886.2
764.9
168.3
120.9
6.9
717.1
Total
9,596.4
8,873.6
9,504.4
9,044.7
Concentration of default risks is avoided through strict limits for all fixed-income securities imposed by the supervisory bodies of the Gothaer Group. In addition, the amounts
and ratings of individual exposures are constantly monitored to permit timely identification of possible defaults.
The effective interest rates on our fixed-income securities lie between 0.0 % and 14.9 %.
All valuation categories include financial instruments with variable coupons that are
dependent upon market conditions or specific corporate events.
Investments
available for sale
122
€ million
Impairment
2010
2009
Impairment
Due to permanent negative fair value reserve
Due to repeated impairment of impaired investments
605.6
1.416.6
0.6
19.3
7.9
46.4
0.2
83.8
16.4
83.7
531.4
1.232.5
[9]
Investments
measured at fair value
through profit or loss
€ million
Amortized cost
Fair value
2010
2009
2010
2009
0.0
0.0
0.0
0.0
0.0
0.0
69.6
0.4
70.1
10.4
52.5
62.9
10.9
0.0
10.9
6.1
0.5
6.6
11.8
0.0
11.8
6.7
0.6
7.3
10.9
6.6
81.9
70.2
Held for trading
Non-fixed-income
Fixed-income
By designation
Non-fixed-income
Fixed-income
Total
The Gothaer Group does not use hedge accounting within the meaning of IAS 39. All
derivative financial instruments are therefore shown under investments held for trading.
Derivatives are financial instruments whose value changes as a function of the changes
in one or more underlying variables. Derivative financial instruments are used within the
Gothaer Group for purposes of performance management and protection of investment
portfolios against falling prices. In particular, forward foreign exchange contracts are used
to protect against exchange rate risks and interest swaps to protect against changes in
interest rates. All derivative financial instruments are recognized based on conventional
option, future or swap models.
Derivative
financial instrument
Valuation models
Derivative
Pricing method
Parameters
Pricing model
Listed share options
Quoted price
—
—
Total return swaps
Theoretical price
Market value of reference
instrument
Yield curve
Cash value
method
Yield swaps
Theoretical price
Swap curve
Money market yield curve
Cash value
method
Forward exchange
Theoretical price
Spot rate transactions
Money market yield curve
Cash value
method
Credit default swaps
Theoretical price
Credit spreads
Recovery rates
Yield curve
Cash value
method
123
Embedded derivatives are separated from the host contracts and shown under investments held for trading. Hybrid financial instruments are generally fixed-income securities that have been combined with a derivative. All hybrid instruments are separated
from their host contracts in compliance with the provisions of IAS 39.11(a) if their
characteristics and risks are not closely related to those of the respective host contracts
and they go beyond the interest risks of the respective host contracts. Host contracts
are recognized as fixed-income securities at amortized cost under loans or investments
held to maturity or alternatively at fair value under investments available for sale.
Separation of derivatives from underlyings involves three categories of securities.
The first category includes bonds with interest coupons and/or redemption linked to a
reference instrument (e. g., stock indices or hedge funds). Such structures consist of a
plain vanilla bond and a long call or a total return swap on the underlying reference
asset. In the case of a total return swap, we assume that the yield of the plain vanilla
bond is variable and in line with the market. The fluctuation in fair value is thus recognized through profit or loss at total return swap level. The second category includes
separate recognition of credit-linked notes. In this case, the embedded credit default
swap used to hedge the credit risk is shown separately. In the third category are hybrid
bonds consisting of a plain vanilla bond for retirement at call date and a short put.
Derivative financial instruments with a negative fair value are shown in equity and
liabilities under item E. liabilities.
In the preceding year, as required by IAS 39.11(c) hybrid instruments in special funds
were accounted for as financial instruments at fair value under the subheading “by
designation” which were disposed of in the financial year. The maximum credit risk of
financial instruments recognized by designation at fair value through profit or loss is
€ 0.6 million.
124
profit or loss
€ million
Held for trading
By designation
2010
2009
2010
2009
Up to 1 year
1 to 2 years
2 to 3 years
3 to 4 years
4 to 5 years
5 to 10 years
After 10 years
0.1
0.3
0.0
0.0
0.0
0.0
0.0
1.1
0.1
0.3
0.0
3.9
46.8
0.3
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.6
0.0
0.0
0.0
Total
0.4
52.5
0.0
0.6
€ million
Held for trading
By designation
2010
2009
2010
2009
AAA
AA
A
BBB
BB
B
CCC and lower
Non-rated
0.0
0.2
0.0
0.0
0.0
0.0
0.0
0.2
0.0
0.0
0.0
0.0
0.0
0.0
0.0
52.5
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.6
0.0
0.0
Total
0.4
52.5
0.0
0.6
125
profit or loss
€ million
Valuation hierarchy
Level 1
Quoted
prices
Level 2
Valuation
based on
observed
market data
Level 3
Valuation
based on
individual
parameters
Total
2010
2010
2010
2010
Investments measured at fair value
and recognized directly in equity
Non-fixed-income
Fixed-income
625.7
7,559.7
1,580.7
1,556.7
1,088.9
388.0
3,295.3
9,504.4
Held for trading
By designation
3.9
6.4
– 58.4
5.4
0.0
0.0
– 54.5
11.8
Investments held for unit-linked
1,192.1
209.0
0.0
1,401.1
Total
9,387.8
3,293.4
1,476.9
14,158.1
€ million
Valuation hierarchy
Level 1
Quoted
prices
Level 2
Valuation
based on
observed
market data
Level 3
Valuation
based on
individual
parameters
Total
2009
2009
2009
2009
and recognized directly in equity
Non-fixed-income
Fixed-income
801.7
7,641.7
1,543.0
1,403.0
901.6
0.0
3,246.3
9,044.7
Held for trading
By designation
– 0.2
7.3
– 73.3
0.0
0.0
0.0
– 73.5
7.3
886.7
238.0
0.0
1,124.7
9,337.2
3,110.7
901.6
13,349.5
Investments held for unit-linked
Total
126
Investments measured at fair value and recognized directly in equity include nonconsolidated shares in affiliated and associated companies as well as investments
available for sale.
The valuation hierarchy also shows the investments measured at fair value through profit
or loss, which have a negative fair value and are recognized accordingly under liabilities
on the equity and liabilities side of the statement of financial position.
Investments with a fair value of € 19.0 million (PY: € 12.3 million) were reclassified from
level 2 to level 1 in the year under review because the model price calculation performed
in the prior year because of inactive markets was no longer required.
Investments with a fair value of € 30.4 million were reclassified in 2010 from level 3 to
level 2. The investments reclassified were index certificates whose price depends on
various assets and for which market data were available for the entire observation period.
Reconciliation
of level 3 investments
€ million
2010
2009
Value as of 1 Jan.
901.6
819.8
Change in value recognized through profit or loss
Change in value recognized in equity
Acquisitions
Sales
Change in class assignment
– 27.0
115.7
614.5
97.5
– 30.4
–87.7
–11.5
194.2
13.2
0.0
1,476.9
901.6
Value as of 31 Dec.
Level 3 investments produced a net profit of € 8.9 million (PY: € 64.5 million)
127
[10]
Other investments
€ million
2010
2009
Deposits retained on assumed business
Bank deposits
Miscellaneousother
51.8
852.3
27.0
56.8
694.0
37.8
Total
931.1
788.6
€ million
Deposits with
ceding undertakings
Bank deposits
Other investments
2010
2009
2010
2009
2010
2009
Up to 1 year
1 to 5 years
After 5 years
50.9
0.0
0.9
56.1
0.0
0.7
852.3
0.0
0.0
694.0
0.0
0.0
1.9
4.7
20.4
12.0
6.4
19.4
Total
51.8
56.8
852.3
694.0
27.0
37.8
The carrying amount of other investments corresponds to the fair value.
[11]
Receivables
€ million
Breakdown by type of receivable
2010
2009
91.0
117.8
108.1
98.1
Accounts receivable in connection with
45.5
54.0
Accounts receivable from affiliated
and associated companies
22.2
13.7
Deferred interest and rent
336.5
303.9
Miscellaneous other
282.8
252.6
Total
895.8
830.4
Receivables from primary insurance
business
from policyholders
from intermediaries
The carrying amount of receivables corresponds to the fair value. Prepayments of
€ 0.2 million (PY: € 0.2 million) were made. There are no receivables from related companies.
128
Receivables
€ million
2010
2009
Opening balance
sheet 2009
Up to 1 year
1 to 5 years
After 5 years
842.8
74.8
62.5
824.6
73.3
61.1
875.8
25.2
61.1
Total
980.1
959.0
962.1
In addition to the receivables shown under item E. receivables in the statement of
financial position, other receivables include the tax refunds due in the amount of
€ 84.3 million (PY: € 128.6 million) that are shown under item J. I. of the statement of
financial position.
[12]
Deferred acquisition
costs (net)
€ million
Breakdown by segment*
Property/
Casualty**
Life
Health
Total
2010
2009
2010
2009
2010
2009
2010
2009
Balance 1 Jan.
Gross
Reinsurers’ share
Net
60.4
19.1
41.3
48.1
10.0
38.1
832.5
49.9
782.6
839.3
61.0
778.3
160.0
0.0
160.0
149.5 1,052.9 1,036.9
0.0
69.0
71.0
149.5
983.9
965.9
New deferred
acquisiton cost
Gross
Reinsurers’ share
Net
52.7
16.6
36.1
47.6
21.4
26.2
53.7
0.5
53.2
74.1
1.4
72.7
26.1
0.0
26.1
29.3
0.0
29.3
132.5
17.1
115.4
151.0
22.8
128.2
Amortization
Gross
Reinsurers’ share
Net
49.7
16.4
33.3
35.4
12.3
23.1
77.2
11.4
65.8
80.9
12.5
68.4
20.0
0.0
20.0
18.7
0.0
18.7
146.9
27.8
119.1
135.0
24.8
110.2
Balance 31 Dec.
Gross
Reinsurers’ share
Net
63.4
19.3
44.1
60.3
19.1
41.2
809.0
39.0
770.0
832.5
49.9
782.6
166.1
0.0
166.1
160.1 1,038.5 1,052.9
0.0
58.3
69.0
160.1
980.2
983.9
* Figures based on full consolidation
** Including insurance portfolio of Gothaer Finanzholding AG
129
[13]
Tax assets
Deferred tax assets are based on the one hand on deferred taxes arising from tax loss
carryforwards and on the other hand on lower carrying amounts for investments under
IFRS than under the tax balance sheet and higher carrying amounts for provisions for
pension benefits.
In the current financial year, corporate income tax loss carryforwards in the amount of
€ 174.7 million (PY: € 196.0 million) and trade tax loss carryforwards in the amount of
€ 128.1 million (PY: € 163.4 million) were considered not utilizable so that no deferred tax
assets were recognized. They can be used without time limitation.
[14]
Other assets
130
€ million
Breakdown by asset item
2010
2009
Inventories
Other assets
2.2
6.9
2.3
7.4
Total
9.1
9.7
Notes to the Consolidated Statement of Financial Position –
Equity and Liabilities
[15]
Other reserves
€ million
Breakdown by reserve item
Unrealized gains and losses
on investments available for sale
resulting from reclassification
of investments
Total
2010
2009
Opening balance
sheet 2009
42.9
40.3
2.5
– 18.5
– 20.9
–28.9
24.4
19.4
–26.4
Due to the application of the revised version of IAS 39 in 2005, investments in the
available for sale category were reassigned to the valuation categories for investments
held to maturity and loans. In 2008, the new option in IAS 39.50 was used to reclassify
other investments available for sale as loans. The unrealized gains and losses from these
reclassified investments are recognized in a special reserve under other reserves. In the
event of the disposal or impairment of an investment, the reserve is reversed in full.
If the investment remains unchanged in the portfolio, the reserve is reversed by
amortization over the residual term of the asset.
Unrealized gains
and losses on
investments available
for sale
€ million
Reconciliation
2010
2009
120.3
158.5
Less:
Reserves for deferred premium refunds
Deferred taxes
Effects of consolidation
50.5
– 9.1
36.0
114.2
– 4.6
8.6
Total
42.9
40.3
Gross amount
The increase in effects of consolidation is due to the initial consolidation of Metrawatt
Holding AG and capiton Gießereitechnik GmbH. Exchange rate differences of € 1.6 million (PY: – € 0.8 million) were recognized directly in equity.
131
[16]
Minority interests
[17]
€ million
Breakdown by equity item
2010
2009
Opening balance
sheet 2009
Revenue reserves
Other reserves
Net profit for the year
31.0
36.0
5.7
22.2
8.6
1.7
27.2
5.8
2.6
Total
72.7
32.5
35.6
€ million
Breakdown by type of underwriting reserve
2010
Gross
Re
Net
Unearned premiums
Policy reserves
Reserves for unpaid claims
Other underwriting reserves
Reserves for premium refunds
Miscellaneous other underwriting reserves
491.5
18,158.1
2,221.6
88.9
1,285.4
425.0
402.6
16,872.7
1,796.6
1,698.1
17.3
0.2
– 4.3
1,697.9
21.6
Total
22,586.6
1,795.2
20,791.4
€ million
2009
132
Gross
Re
Net
Unearned premiums
Policy reserves
464.9
17,709.8
2,234.6
89.7
1,307.0
448.9
375.2
16,402.8
1,785.7
1,768.8
8.1
0.2
– 8.8
1,768.6
16.9
Total
22,186.2
1,837.0
20,349.2
€ million
Opening balance sheet 2009
Underwriting
reserves – gross
Gross
Re
Net
Unearned premiums
Policy reserves
431.5
16,774.1
2,262.4
79.2
1,327.0
501.7
352.3
15,447.1
1,760.7
1,579.4
9.9
0.2
– 5.7
1,579.2
15.6
Total
21,057.3
1,902.4
19,154.9
€ million
Maturities
2010
1 year
1 to 5
years
More Without a
than 5 fixed term
years
Total
Unearned premiums
Policy reserves
375.6
1,116.4
823.9
115.9
2,800.0
547.5
0.0
9,311.4
764.4
0.0
4,930.3
85.8
491.5
18,158.1
2,221.6
49.8
15.5
70.6
1.8
0.0
0.0
1,577.7
0.0
1,698.1
17.3
Total
2,381.2
3,535.8
10,075.8
6,593.8
22,586.6
€ million
Maturities
2009
Unearned premiums
Policy reserves
Total
1 year
1 to 5
years
More Without a
than 5 fixed term
years
Total
348.4
899.3
752.1
116.5
2,904.1
578.4
0.0
9,308.8
823.5
0.0
4,597.6
80.6
464.9
17,709.8
2,234.6
72.1
5.7
73.0
1.7
0.0
0.0
1,623.7
0.6
1,768.8
8.1
2,077.6
3,673.7
10,132.3
6,302.5
22,186.2
133
Underwriting
reserves – gross
€ million
Maturities
Unearned premiums
Policy reserves
Total
Underwriting
reserves –
reinsurers’ share
1 year
1 to 5
years
More Without a
than 5 fixed term
years
Total
330.3
792.5
751.4
101.2
2,822.0
555.9
0.0
8,875.3
876.8
0.0
4,284.3
78.3
431.5
16,774.1
2,262.4
64.9
7.4
103.1
1.9
0.0
0.0
1,411.4
0.6
1,579.4
9.9
1,946.5
3,584.1
9,752.1
5,774.6
21,057.3
€ million
Maturities
2010
134
1 year
1 to 5
years
More Without a
than 5 fixed term
years
Total
Unearned premiums
Policy reserves
37.7
100.9
160.2
51.2
317.3
102.7
0.0
747.4
91.4
0.0
119.8
70.7
88.9
1,285.4
425.0
0.2
– 4.3
0.0
0.0
0.0
0.0
0.0
0.0
0.2
– 4.3
Total
294.7
471.2
838.8
190.5
1.795.2
Underwriting
reserves –
reinsurers’ share
€ million
Maturities
2009
1 year
1 to 5
years
More Without a
than 5 fixed term
years
Total
Unearned premiums
Policy reserves
34.8
86.0
129.0
54.9
329.7
117.4
0.0
776.6
118.4
0.0
114.7
84.1
89.7
1,307.0
448.9
0.2
– 8.8
0.0
0.0
0.0
0.0
0.0
0.0
0.2
– 8.8
Total
241.2
502.0
895.0
198.8
1,837.0
€ million
Maturities
[18]
Unearned premiums
1 year
1 to 5
years
More Without a
than 5 fixed term
years
Total
Unearned premiums
Policy reserves
35.1
90.0
148.4
44.1
326.4
123.3
0.0
800.1
132.8
0.0
110.5
97.2
79.2
1,327.0
501.7
0.2
– 5.7
0.0
0.0
0.0
0.0
0.0
0.0
0.2
– 5.7
Total
268.0
493.8
932.9
207.7
1,902.4
€ million
Property/
Casualty**
Life
Health
Total
2010
2009
2010
2009*
2010
2009
2010
2009
Gross
Reinsurers’
share
491.5
464.8
0.0
0.0
0.0
0.1
491.5
464.9
88.9
89.7
0.0
0.0
0.0
0.0
88.9
89.7
Net
402.6
375.0
0.0
0.0
0.0
0.2
402.6
375.2
135
[19]
Policy reserves
€ million
Property/
Casualty**
2010
Gross
Reinsurers’
share
50.9
Net
50.9
0.0
Life
2009
Health
2009
2010
51.4 14,320.8 14,077.8
3,786.4
0.0
2010
Total
1,285.4
1,307.0
0.0
51.4 13,035.4 12,770.8
3,786.4
2009
2010
2009
3,580.6 18,158.1 17,709.8
0.0
1,285.4
1,307.0
3,580.6 16,872.7 16,402.8
Life insurance
policy reserves
€ million
2010
Gross
Re
Net
Gross
Re
Net
14,077.9
1,307.0
12,770.8
13,352.2
1,327.0
12,025.2
541.1
298.2
0.8
22.4
540.3
275.8
2,444.5
1,718.9
0.5
20.6
2,444.0
1,698.3
14,320.8
1,285.4
13,035.4
14,077.8
1,307.0
12,770.8
Allocations
Amount used
Health insurance
policy reserves
2009
€ million
2010
Allocations
136
2009
Gross
Re
Net
Gross
Re
Net
3,580.6
0.0
3,580.6
3,370.9
0.0
3,370.9
205.8
0.0
205.8
209.7
0.0
209.7
3,786.4
0.0
3,786.4
3,580.6
0.0
3,580.6
[20]
Reserves for unpaid
claims
€ million
Property/
Casualty**
2010
Life
Health
Total
2009
2010
2009
2010
2009
Gross
Reinsurers’
share
2,012.5 2,044.1
56.1
54.3
153.0
136.2 2,221.6 2,234.6
446.9
1.1
1.4
0.6
Net
1,589.2 1,597.2
55.0
52.9
152.4
423.3
0.6
2010
425.0
2009
448.9
135.6 1,796.6 1,785.7
Reserves for unpaid
property/casualty
insurance claims
€ million
Gross
Reinsurers’ share
Net
Plus losses incurred (net)
Financial year
Previous year
Total
Less claims paid (net)
Financial year
Previous year
Total
Currency translation
Other changes
Net
Reinsurers’ share
Gross
2010
2009
2,044.1
446.9
1,597.2
2,078.9
500.9
1,578.0
1,033.3
– 112.3
921.1
925.8
– 49.4
876.4
552.9
379.5
932.5
1.4
2.0
458.7
394.6
853.4
0.2
– 4.1
1,589.2
423.3
2,012.5
1,597.2
446.9
2,044.1
137
Gross reserves for
unpaid claims
of Gothaer Allgemeine
Versicherung AG
(primary business)
138
€ million
Run Off
Financial year
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2001
Reserves 1 Jan.
Payments
Reserves 31 Dec.
Run-off
—
535.1
500.0
—
500.0
258.1
205.9
35.9
205.9
59.2
143.2
3.5
143.2
25.6
109.7
7.8
109.7
14.8
97.3
– 2.3
97.3
10.3
81.0
5.9
81.0
7.0
77.4
– 3.5
82.5
12.3
71.5
– 1.3
71.5
7.2
64.7
–0.4
64.7
10.4
52.7
1.5
2002
Reserves 1 Jan.
Payments
Reserves 31 Dec.
Run-off
—
—
—
—
—
568.5
498.0
—
498.0
256.7
199.1
42.2
199.1
62.7
129.7
76.7
129.7
30.4
109.0
– 9.7
109.0
18.2
87.3
3.4
87.3
13.9
76.9
– 3.5
85.1
10.9
72.1
2.1
72.1
8.6
63.7
–0.1
63.7
8.4
58.2
– 2.9
2003
Reserves 1 Jan.
Payments
Reserves 31 Dec.
Run-off
—
—
—
—
—
—
—
—
—
449.5
407.4
—
407.4
204.0
171.3
32.0
171.3
58.3
122.3
– 9.3
122.3
23.9
92.7
5.7
92.7
13.3
80.6
– 1.2
81.7
7.5
67.0
7.2
67.0
13.0
54.7
–0.6
54.7
7.1
47.1
0.4
2004
Reserves 1 Jan.
Payments
Reserves 31 Dec.
Run-off
—
—
—
—
—
—
—
—
—
—
—
—
—
433.5
399.9
—
399.9
196.5
170.8
32.6
170.8
52.8
116.0
2.0
116.0
24.0
93.0
– 0.9
93.0
13.5
79.3
0.2
79.3
10.2
66.2
2.9
66.2
11.0
59.5
– 4.2
2005
Reserves 1 Jan.
Payments
Reserves 31 Dec.
Run-off
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
403.9
385.1
—
385.1 171.2
209.8
53.6
171.2 128.7
4.1 –11.1
128.7
24.0
84.9
19.8
84.9
10.3
70.8
3.8
70.8
10.5
57.5
2.7
2006
Reserves 1 Jan.
Payments
Reserves 31 Dec.
Run-off
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
396.8
406.4
—
406.4 168.5
218.5
58.6
168.5 125.7
19.3 – 15.8
125.7
25.6
95.7
4.4
95.7
20.1
76.0
– 0.4
2007
Reserves 1 Jan.
Payments
Reserves 31 Dec.
Run-off
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
469.1
421.1
—
421.1
206.8
188.1
26.3
188.1
56.7
118.5
12.8
118.5
29.1
86.2
3.2
2008
Reserves 1 Jan.
Payments
Reserves 31 Dec.
Run-off
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
431.3
447.1
—
447.1
215.2
198.3
33.6
198.3
58.9
121.7
17.7
2009
Reserves 1 Jan.
Payments
Reserves 31 Dec.
Run-off
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
402.1
440.0
—
440.0
221.2
181.2
37.6
2010
Reserves 1 Jan.
Payments
Reserves 31 Dec.
Run-off
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
430.7
461.2
—
[21]
Other underwriting
reserves
2010
Gross
Other underwriting
reserves (net)
€ million
Breakdown by type of reserve
Reserve for
premium
refunds
Miscellaneous
others
1,698.1
Total
1,715.4
17.3
2009
Re
Net
Gross
0.2 1,697.9 1,768.8
–4.3
21.6
8.1
–4.1 1,719.5 1,776.9
Opening balance
sheet 2009
Re
Net
Gross
0.2 1,768.6 1,579.4
–8.8
16.8
9.9
–8.6 1,785.4 1,589.3
Re
Net
0.2 1,579.2
–5.7
15.6
–5.5 1,594.8
€ million
2010
Property/
Casualty **
Life
Health
Total
Reserve for premium refunds
Miscellaneous other
11.8
17.8
894.1
3.8
792.0
0.0
1,697.9
21.6
Total
29.6
897.9
792.0
1,719.5
€ million
2009
Property/
Casualty **
Life
Health
Total
Miscellaneous other
12.0
16.1
989.0
0.7
767.6
0.0
1,768.6
16.8
Total
28.1
989.7
767.6
1,785.4
€ million
Property/
Casualty **
Life
Health
Total
Miscellaneous other
12.2
14.7
864.9
0.9
702.1
0.0
1,579.2
15.6
Total
26.9
865.8
702.1
1,594.8
**Including insurance portfolio of Gothaer Finanzholding AG
139
Reserves for premium refunds (bonus reserve) include on the one hand the performancerelated and non-performance-related amounts credited to policyholders in compliance
with national or regulatory requirements, legal provisions or contractual conditions; on the
other hand, they also include the deferred premium refunds that result for life and health
insurance companies from differences in the value of assets and liabilities between the
German Commercial Code (HGB) and IFRS. In accounting for deferred premium refunds,
care is taken to ensure that they are no less – at each legal entity – than the appropriated
reserves for premium refunds.
Reserves for
life insurance
premium refunds
Amounts transferred pursuant to national
requirements (gross)
Allocations
Amount used
Reserves for
health insurance
premium refunds
2010
2009
Opening
balance sheet
2009
653.7
120.0
101.2
672.5
721.0
42.6
109.9
653.7
741.1
107.7
127.8
721.0
Deferred premium refunds
Change in unrealized gains and losses on
investments available for sale
Other changes
335.4
143.9
795.0
– 69.1
– 44.7
221.6
269.4
– 78.0
335.3
–353.5
–297.6
143.9
Gross
Reinsurers’ share
Net
894.1
0.0
894.1
989.0
0.0
989.0
864.9
0.0
864.9
€ million
Allocations
Amount used
140
€ million
2010
2009
Opening
balance sheet
2009
609.4
135.4
97.9
646.9
592.1
101.1
83.8
609.4
572.0
131.1
111.0
592.1
Change in unrealized gains and losses on
investments available for sale
Other changes
158.2
110.0
207.2
5.5
– 18.6
145.1
46.4
1.8
158.2
– 98.6
1.4
110.0
Gross
Reinsurers’ share
Net
792.0
0.0
792.0
767.6
0.0
767.6
702.1
0.0
702.1
Reserves for
property/casualty
insurance
premium refunds
€ million
2010
2009
Opening
balance sheet
2009
Allocations
Amount used
12.2
2.6
1.4
12.1
12.4
2.6
1.2
12.2
10.9
3.8
1.4
12.4
Gross
Reinsurers’ share
Net
12.1
0.2
11.8
12.2
0.2
12.0
12.4
0.2
12.2
[22]
Provisions for pension
benefits and similar
obligations
The companies of the Gothaer Group provide pension benefits for their employees and
insurance agents. Both defined benefit and defined contribution plans are used. Total
obligations arising from provisions for pension benefits came to € 312.5 million in the
financial year (PY: € 306.3 million).
Defined benefit plans
In case of defined benefit plans, beneficiaries are promised specific benefits through the
company or a pension scheme. The contributions of the company are not fixed in
advance. Pension schemes are pension funds and benefit associations and societies that
insure mainly employees of domestic enterprises.
Defined benefit plans are based on the use of actuarial estimates and assumptions.
Actuarial assumptions
The basic biometric values for both years are based on the Prof. Dr. Heubeck 2005 G
Mortality Tables. Anticipated yields are mostly at the level of anticipated bonuses for
Gothaer Lebensversicherung AG’s life insurance policies.
Parameters
Discount rate
Expected rate of return on plan assets
Expected salary increase
Expected increase of pensions
Expected average remaining working lifetime (in years)
Fluctuation probability
2010
2009
4,90 %
4,50 %
2,50 %
1,90 %
0– 16
6,00 % to age 35
3,00 % to age 45
5,10 %–5,30 %
4,50 %
2,20 %
1,90 %
0–16
6,00 % to age 35
3,00 % to age 45
141
The present value of provisions for pension benefits as of 31 December 2010 represents
total estimated obligations as of that time less plan assets and unrecognized actuarial
gains. The individual steps involved in calculation are presented below in tabular form.
Defined benefit
obligations (DBO)
€ million
2010
2009
Present value of defined benefit obligations as of 1 Jan.
Current service cost including interest
Interest cost
New actuarial gains/losses on liabilities
Pension benefits paid from plan assets
Pension benefits paid by employer
Transfers in
Transfers out
643.9
9.5
33.3
29.9
–15.5
–15.4
4.5
– 4.5
610.4
9.7
33.9
19.8
–14.9
– 15.1
0.0
0.0
Present value of defined benefit obligations as of 31 Dec.
685.7
643.9
Capital cover comes to 53.2 % (PY: 54.5 %).
Plan assets
€ million
2010
2009
Plan assets as of 1 Jan.
Expected return on plan assets
Actuarial gains/losses on plan assets
Employer contributions to plan assets
Pension benefits paid from plan assets
350.9
15.6
8.2
5.6
–15.5
344.9
15.3
–1.1
6.7
–14.9
Plan assets as of 31 Dec.
364.8
350.9
Reinsurance and direct insurance account for 5.2 % (PY: 4.6 %) of plan assets and assets
of the pension funds for 94.8 % (PY: 95.4 %).
Actuarial gains/losses
€ million
Unrecognized gains (–)/losses as of 1 Jan.
Actuarial gains (–)/losses on liabilities as of 31 Dec.
Actuarial gains/losses (–) on plan assets as of 31 Dec.
Amortization of actuarial gains/losses (–)
Unrecognized gains (–)/losses as of 31 Dec.
142
2010
2009
– 13.3
29.9
–8.2
–0.1
–33.9
19.8
1.1
– 0.2
8.3
–13.3
Provisions for
pension benefits
Net obligations as of 31 Dec.
Unrecognized actuarial gains/losses (–) as of 31 Dec.
Unrecognized past service costs as of 31 Dec.
Provisions for pension benefits as of 31 Dec.
Expected defined benefit
obligations (DBO)
€ million
2010
2009
685.7
– 364.9
320.8
– 8.3
0.0
643.9
– 350.9
293.0
13.3
0.0
312.5
306.3
€ million
2010
2009
Present value of defined benefit obligations as of 1 Jan.
Interest cost
Transfers in
Transfers out
Pension benefits paid
643.9
9.5
33.3
4.5
– 4.5
–31.9
610.4
9.7
33.9
0.0
0.0
–31.1
Expected defined benefit obligations as of 31 Dec.
654.8
622.9
Experience-based adjustments to plan liabilities came to –€ 30.9 million in the financial
year (PY: – € 21.1 million). Of this amount, € 9.5 million (PY: € 1.1 million) is accounted
for by changes in the portfolio and – € 40.4 million (PY: – € 22.2 million) by changes in
parameters. Experience-based adjustments to plan assets came to € 7.9 million in the
financial year (PY: € 0.5 million).
143
on liabilities
€ million
Expected defined benefit obligations as of 31 Dec.
Actual payments of pension benefits
Expected payments of pension benefits
Actuarial gains (–)/losses on liabilities as of 31 Dec.
2010
2009
685.7
654.8
–30.9
–31.9
643.9
622.9
– 29.9
–31.1
29.9
19.8
Expected plan assets
€ million
on plan assets
2010
2009
Plan assets as of 1 Jan.
Expected employer contributions to plan assets
Expected pension benefits paid from plan assets
350.9
15.6
6.7
–16.2
344.9
15.3
6.1
–15.8
Expected plan assets as of 31 Dec.
357.0
350.5
Expected plan assets as of 31 Dec.
Actual employer contributions to plan assets
Actual pension benefits paid from plan assets
Expected pension benefits paid from plan assets
Actuarial gains/losses (–) on plan assets as of 31 Dec.
144
€ million
2010
2009
364.8
357.0
– 5.6
15.5
– 6.7
16.2
350.9
350.5
– 6.7
14.9
– 6.1
15.8
8.2
–1.1
Pension costs
€ million
Breakdown by type of expense
Interest cost
Amortization of actuarial gains (–)/losses
Amortization of past service cost of plan amendments
For vested benefits
For non-vested benefits
Pension costs
Provisions for
pension benefits
2010
2009
9.5
33.3
–15.6
0.1
9.7
33.9
– 15.3
0.2
0.0
0.0
0.0
0.0
27.3
28.5
€ million
2010
2009
Provisions for pension benefits as of 1 Jan.
Pension cost for financial year
Transfers in
Transfers out
Actual pension benefits paid by employer
Actual employer contributions to plan assets
306.3
27.3
4.5
– 4.5
– 15.4
– 5.6
299.4
28.5
0.0
0.0
–15.1
– 6.7
312.5
306.3
Expected income from plan assets came to € 15.6 million (PY: € 15.3 million) and actual
income from plan assets to € 23.8 million (PY: € 14.5 million). Plan assets are invested
exclusively in fixed-income securities.
Amortization amount
€ million
Information
Unrecognized cost of plan amendments for financial year
Unrecognized gains (–)/losses as of 31 Dec.
Corridor pursuant to IAS 19.92
Gains (–)/losses outside of corridor
Amortization for subsequent years
Amortization period in years
2010
2009
685.7
364.8
0.0
312.5
8.3
68.6
2.3
0.3
0–16
643.9
350.9
0.0
306.3
–13.3
64.6
0.8
0.1
0–16
145
The estimate of provisions for pension benefits as of 31 December 2011 which is required
for compliance with IAS 19, is based on the following assumptions about the volume of
anticipated pension costs as well as the future amortization payable.
Expected
pension costs
Interest cost
Amortization of actuarial gains (–)/losses
Expected pension costs
Expected provisions
for pension benefits
Defined contribution
pension plans
€ million
2011
2010
10.4
32.8
– 16.2
0.3
9.5
33.3
– 15.6
0.1
27.3
27.3
€ million
Developments
2011
2010
Provisions for pension benefits as of 1 Jan.
Expected pension cost
Expected pension benefits paid by employer
312.5
27.3
–16.1
– 6.3
306.3
27.3
– 15.6
– 6.7
Expected provisions for pension benefits as of 31 Dec.
317.4
311.2
€ million
Breakdown by type of plan
2010
2009
Pension benefit plans by the use of deferred compensation
Direct insurance paid by employers
Direct insurance paid by employees
Lump-sum taxes
0.6
0.1
0.2
0.1
0.7
0.1
0.2
0.1
Total
1.0
1.1
Defined contribution pension plans involve either direct commitments or direct insurance. In this case, predetermined amounts are paid, for example, as a function of
compensation, and the rights of the recipient exist in the form of a pledge or title against
an insurance company and the obligation of the employer is fulfilled upon payment of
premiums.
146
[23]
Other accruals
€ million
2010
Accruals for
Jubilee
Part-time
obligations pre-retirement
Balance as of 1 Jan
Amount used
Reversals
Allocations
Social plan
Litigation
Miscellaneous others
20.0
49.4
4.6
35.0
5.0
0.0
1.6
2.3
0.0
4.3
1.4
0.7
1.0
0.1
0.2
11.0
9.5
1.7
0.3
13.3
20.7
46.5
3.0
33.3
16.3
€ million
Developments in the previous year
2009
Accruals for
Balance as of 1 Jan
Amount used
Reversals
Allocations
Jubilee
Part-time
obligations pre-retirement
Social plan
Litigation
19.2
46.3
8.8
29.2
6.5
0.0
0.1
0.9
0.0
0.6
3.6
6.8
0.2
2.8
6.7
0.9
13.4
1.5
1.9
1.9
20.0
49.3
4.6
35.0
5.0
€ million
Breakdown by type of reserve and maturity
2010
Up to 1 year
1 to 5 years
After 5 years
Total
Jubilee obligations
Part-time pre-retirement
Social plan
Litigation
2.0
2.2
0.2
4.2
11.4
5.7
30.2
2.7
29.1
4.6
13.0
14.1
0.1
0.0
0.4
20.7
46.5
3.0
33.3
16.3
Total
20.0
72.3
27.6
119.8
147
Other accruals
€ million
Breakdown by type of reserve and maturity
2009
Jubilee obligations
Part-time pre-retirement
Social plan
Litigation
Total
Up to 1 year
1 to 5 years
After 5 years
Total
1.6
1.9
1.9
4.0
2.5
5.6
25.7
2.6
30.9
2.5
12.8
21.7
0.1
0.0
0.0
20.0
49.3
4.6
35.0
5.0
11.9
67.3
34.6
113.9
While uncertainty about both the extent and maturity of the anticipated obligation is
relatively low in the case of accruals for jubilee obligations, the remaining accruals are
marked by a higher degree of uncertainty.
[24]
Liabilities
Bonds and loans
Other liabilities
Deposits received from reinsurers
Liabilities in connection with primary insurance business
towards policyholders
towards intermediaries
Liabilities in connection with reinsurance business
Liabilities toward affiliated and associated companies
Miscellaneous other
Total
148
€ million
Breakdown by type of liability
2010
2009
35.0
264.7
187.6
35.0
264.7
187.6
1,358.7
1,384.5
737.9
29.1
32.0
17.0
287.0
805.0
32.1
37.2
6.9
301.1
2,949.0
3,054.1
The liabilities in connection with primary insurance business mainly include accumulated
interest-bearing surpluses and premium deposits from life insurance. Aside from derivative financial instruments with negative fair values, miscellaneous liabilities include
social security liabilities, trade payables and sundry liabilities.
The interest payable on participation certificates and subordinate liabilities as well as
bonds and loans is recognized separately in the statement of income as financing
expenses and amounted to € 21.4 million in the financial year (PY: € 25.1 million).
Participation certificates had a fair value of € 40.7 million (PY: € 40.3 million) and subordinate liabilities a fair value of € 252.3 million (PY: € 246.4 million). The fair value of the
remaining liabilities was equal to the balance sheet value.
Liabilities
€ million
2010
Up to 1
year
1 to 5
years
After 5
years
Without
a fixed
term
Total
Bonds and loans
Derivatives with negative fair value
Liabilities
0.0
0.0
1.1
1.2
902.1
15.0
0.0
121.5
0.0
24.5
20.0
264.7
65.0
0.5
1,435.3
0.0
0.0
0.0
122.9
0.0
35.0
264.7
187.6
124.6
2,361.9
Total
904.4
161.0
1,785.5
122.9
2,973.8
€ million
2009
Up to 1
year
1 to 5
years
After 5
years
Without
a fixed
term
Total
Bonds and loans
Derivatives with negative fair value
Liabilities
0.0
0.0
1.1
11.8
1,104.1
15.0
0.0
121.5
1.2
40.7
20.0
264.7
65.0
99.7
1,315.5
0.0
0.0
0.0
23.7
0.0
35.0
264.7
187.6
136.4
2,460.3
Total
1,117.0
178.4
1,764.9
23.7
3,084.0
149
The presentation of other liabilities according to maturities includes tax liabilities in the
amount of € 24.8 million (2009: € 29.9 million; 2008: € 25.9 million) that are shown
under item F. I. on the face of the statement of financial position.
The derivative financial instruments with negative fair values included in other liabilities
are shown separately here. Derivative financial instruments are generally not rated and
have no cost.
[25]
Tax debts
Current tax debts consist of accruals for taxes of € 75.7 million (2009: € 137.7 million)
and current tax liabilities of € 24.8 million (2009: € 29.9 million).
Deferred tax liabilities are mainly due to higher carrying amounts under IFRS than under
the tax balance sheet in the case of investments and lower carrying amounts for underwriting reserves.
150
Notes to the Consolidated Statement of Comprehensive Income
[26]
Premiums
€ million
Property/
Casualty**
2010
Premiums
written***
Gross
1,648.4
Reinsurers’ share
263.8
Net
1,384.6
Change in unearned
premiums
Gross
– 26.0
Reinsurers’ share
1.0
Net
–27.0
Savings
components
Gross
0.0
Reinsurers’ share
0.0
Net
0.0
Net premiums
earned
1,357.6
Life
Health
Total
2009
2010
2009
2010
2009
2010
2009
1,628.0
287.5
1,340.5
1,524.3
77.8
1,446.5
1,847.1
87.5
1,759.6
830.2
5.9
824.3
773.5
5.6
767.9
4,002.9
347.5
3,655.4
4,248.6
380.6
3,868.0
– 33.5
– 10.6
–22.9
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
–26.0
1.0
–27.0
–33.5
–10.6
–22.9
0.0
0.0
0.0
377.7
0.0
377.7
483.1
0.1
483.0
0.0
0.0
0.0
0.0
0.0
0.0
377.7
0.0
377.7
483.1
0.1
483.0
1,317.6
1,068.8
1,276.6
824.3
767.9
3,250.7
3,362.1
*** Including premiums from the reserve for premium refund
Gross premiums in the amount of € 3,947.7 million (PY: € 4,199.4 million) were written in
primary insurance business in the financial year. Reinsurance assumed accounted for
gross premiums in the amount of € 55.2 million (PY: € 49.2 million).
In the case of unit-linked life insurance policies, only that part of the premium used to
cover risks and expenses is shown. Savings components are therefore not included in
premiums earned.
151
[27]
Investment result
€ million
Breakdown by segment and type of income or expense*
Property/
Casualty**
Life
Health
Other
Activities
Total
2010 2009** 2010 2009** 2010 2009** 2010 2009**
Current income
104.0
Write-ups
7.6
Gains on
disposals
101.0
Current expenses 16.0
Write-downs
12.4
Losses on
disposals
95.7
Total
88.5
2010
2009**
109.4
6.7
555.4
66.7
731.9
61.2
205.5
16.7
194.5
6.1
74.8
36.4
26.7
4.0
939.7
127.4
1,062.5
78.0
229.9
8.6
25.2
309.1
42.4
88.8
443.8
125.3
247.7
65.1
14.1
65.4
67.1
12.2
44.3
44.3
16.1
30.8
18.5
6.9
26.3
519.5
88.6
197.4
759.3
153.0
343.5
224.3
287.9
419.4
76.5
90.1
18.3
4.6
478.4
738.4
87.9
512.1
444.5
131.3
121.1
90.3
11.4
822.2
664.9
** Comparatives after restatement
The result from investments held for unit-linked life insurance policies consists of
€ 238.5 million (PY: € 239.2 million) unrealized gains and € 46.6million (PY: € 60.0 million)
unrealized losses.
The result from investments includes an income of € 57.9 million (PY: – € 3.3 million)
resulting from exchange rate differences recognized in the statement of income. Fees
pursuant to IFRS 7.20c were not paid,
Expenses and income in connection with shares in associated companies are shown
below.
Shares in
152
€ million
Expense and income
2010
2009
Write-ups
Write-downs
35.4
6.1
36.0
14.4
Total
29.3
21.6
Investment result
€ million
Breakdown by segment and type of investment*
Property/
Casualty**
Investment
property
Life
2010
2009**
0.0
0.0
Total
2010 2009** 2010 2009** 2010 2009**
2010
2009**
3.3
6.1
3.5
60.5 – 12.5
55.4
4.3
0.2
0.0
0.0
8.6 – 26.5
4.6
5.4
3.6
58.3
22.6
26.3
2.2
0.0
0.2
101.4
35.3
23.7
164.9
166.0
70.3
57.2
15.1
8.6
280.6
255.5
240.0
406.5
333.0
97.5
79.0
27.7
18.2
628.8
670.2
7.8 –54.9 –11.0
–7.1
–0.3
–178.0
– 192.2
16.0
Investments
held to maturity
16.8
10.3
Loans
30.3
Investments
available
for sale
97.1
– 56.8
Other
Activities
1.3
Shares in
affiliated and
associated
companies
Investments
measured at
fair value
through profit
or loss
Health
–188.7 –59.2
4.8
Other
investments
1.1
2.6
9.2
35.6
0.8
2.3
4.4
0.8
15.5
41.3
Less cost of
portfolio
management
16.0
8.6
42.4
125.3
14.1
12.2
15.1
6.9
87.6
153.0
Total
88.5
87.9
512.1
444.5
131.3
121.1
90.3
11.4
822.2
664.9
153
Investment result
€ million
Breakdown of net profit by type of investment
2010
Income
Investment property
Expenses
Net
profit
Current
income
Writeups
Gains on
disposals
Writedowns
Losses on
disposals
8.2
0.6
1.9
4.5
0.0
6.2
88.7
7.1
6.8
45.5
0.6
56.5
Investments held to maturity
106.2
4.8
2.8
13.5
0.0
100.3
Loans
297.8
19.7
10.4
22.8
23.6
281.5
Investments available for sale
Non-fixed-income
Fixed-income
47.9
379.5
0.0
29.1
78.3
170.3
33.6
2.7
23.5
16.6
69.1
559.6
0.5
0.0
47.1
1.1
246.9
1.2
60.4
0.2
413.8
0.3
–179.7
1.8
10.9
17.9
0.9
14.2
0.0
15.5
939.7
127.4
519.5
197.4
478.4
910.8
Investments measured at
fair value through profit or loss
Held for trading
By designation
Other investments
Total
Portfolio management expenses (current expenses) came to € 87.6 million (PY: € 153.0
million).
Current income includes interest in the amount of € 11.1 million (PY: € 29.2 million) from
impaired fixed-income securities.
154
Investment result
€ million
Breakdown of net profit by type of investment
2009
Income
Current
income*
Investment property
8.3
Expenses
WriteGains on
ups disposals*
0.3
0.0
Net
profit
Writedowns
Losses on
disposals
5.1
0.0
3.5
60.4
1.6
3.9
60.8
0.7
4.4
Investments held to maturity
128.0
1.5
3.3
21.0
76.4
35.4
Loans
302.1
5.1
17.4
1.6
67.4
255.6
Investments available for sale
Non-fixed-income
Fixed-income
139.3
387.7
0.0
15.9
275.8
147.1
117.7
21.9
84.2
71.9
213.2
456.9
Investments measured at
fair value through profit or loss
Held for trading
By designation
13.5
0.2
51.4
0.9
292.6
2.2
115.3
0.1
437.7
0.1
– 195.5
3.1
Other investments
23.0
1.3
17.0
0.0
0.0
41.3
1,062.5
78.0
759.3
343.5
738.4
817.9
Total
[28]
Other income
€ million
Breakdown by type of income
Income from commissions and services
Interest and similar income
Sales revenues
Miscellaneous other
Total
2010
2009
23.3
29.3
33.4
56.7
24.2
16.1
31.5
72.2
142.7
144.0
155
[29]
(net)
€ million
Property/casualty insurance*/**
2010
2009
Gross
Re
Net
Gross
Re
Net
1,112.8
180.3
932.5
1,037.8
184.4
853.4
– 38.0
– 23.7
– 14.3
–39.9
– 55.6
15.7
Changes in policy reserves and
other underwriting reserves
6.5
4.1
2.4
–0.9
–3.2
2.3
Premium refunds
3.9
0.3
3.6
3.7
0.2
3.5
Other underwriting
income (–) / expenses(+)
8.7
3.1
5.6
8.9
4.4
4.5
1,093.9
164.1
929.8
1,009.6
130.2
879.4
Claims paid
Changes in reserves for
unpaid claims
Total
€ million
Life insurance*
2010
2009**
Gross
Re
Net
Gross
Re
Net
1,421.8
139.0
1,282.8
1,329.9
145.0
1,184.9
1.8
– 0.3
2.1
1.6
1.0
0.6
141.3
– 21.6
162.9
459.3
– 20.0
479.3
Premium refunds
Due to national regulations
Premium refunds total
120.7
– 77.8
42.9
0.0
0.0
0.0
120.7
– 77.8
42.9
139.7
– 119.1
20.6
0.0
0.0
0.0
139.7
– 119.1
20.6
51.3
–45.5
96.8
–25.2
–46.4
21.2
1,659.1
71.6
1,587.5
1,786.2
79.6
1,706.6
Claims paid
unpaid claims
Other underwriting
Total
156
(net)
€ million
Health insurance*
2010
2009**
Gross
Re
Net
Gross
Re
Net
500.5
5.9
494.6
485.1
5.3
479.8
16.7
0.0
16.7
5.5
0.2
5.3
205.8
0.0
205.8
209.7
0.0
209.7
Premium refunds
Due to national regulations
Premium refunds total
135.4
– 20.8
114.6
0.0
0.0
0.0
135.4
– 20.8
114.6
101.0
– 6.7
94.3
0.0
0.0
0.0
101.0
– 6.7
94.3
1.3
0.0
1.3
0.4
0.0
0.4
838.9
5.9
833.0
795.0
5.5
789.5
Claims paid
unpaid claims
Other underwriting
Total
[30]
(net)
€ million
Acquisition costs
Change in deferred
acquisition cost
Property/
Casualty**
Life
Health
Total
2010
2009
2010
2009
2010
2009
2010
2009
127.7
118.4
113.3
144.1
68.1
65.1
309.1
327.6
– 9.6
– 12.2
23.5
6.8
– 6.1
– 10.5
7.8
–15.9
Administrative expenses
369.5
375.3
38.2
47.8
25.5
23.6
433.2
446.7
Underwriting expenses (gross)
487.7
481.4
175.0
198.8
87.5
78.2
750.1
758.4
Commissions and profit
sharing received on reinsurance
business ceded
71.3
105.8
0.7
2.3
0.0
0.0
72.0
108.1
Change in deferred acquisition
cost
–6.8
–9.1
10.9
11.1
0.0
0.0
4.1
2.0
(reinsurers’ share)
64.6
96.7
11.7
13.4
0.0
0.0
76.2
110.1
423.1
384.7
163.3
185.4
87.5
78.2
673.9
648.3
Total
**Including insurance portfolio of Gothaer Finanzholding AG
157
[31]
Other expenses
€ million
2010
2009
Expenses for commissions and services
Interest and similar expense
Personnel expenses
Other amortization and depreciation
Miscellaneousother
23.5
43.1
68.7
14.3
105.1
23.9
30.8
67.4
21.7
115.6
Total
254.7
259.4
Personnel expenses do not comprise expenses of the insurance companies. Those costs
are distributed to investment expenses, policyholder benefits and underwriting expenses
through cost unit accounting.
Other amortization and depreciation mainly include amortization of intangible assets
and depreciation of operating and office equipment. This item does not contain amortization and depreciation of the insurance companies. As in the case of personnel
expenses, the latter are allocated to functional areas.
[32]
Taxation
€ million
Taxes on income
2010
Current tax expenses for the financial year
Current tax expenses for other periods
Deferred taxes as a result of the occurrence or reversal
of temporary differences
Deferred taxes as a result of the occurrence or use
of tax loss carryforwards
Deferred taxes as a result of the write-down
of a deferred tax claim
2009*
43.0
43.3
2.5
– 5.2
– 20.4
– 86.9
0.0
11.1
1.1
1.6
Deferred taxes as a result of the write-up of a deferred tax claim
– 5.3
0.0
Deferred taxes as a result of tax rate changes
– 4.7
0.0
Total
16.2
–36.1
158
The taxes shown in the statement of income also include change in deferred taxes as well
as the current taxes to be paid by the individual Group companies. The current taxes to
be paid essentially resulted from the minimum taxation of Gothaer Versicherungsbank
VVaG and the companies grouped with it for tax purposes.
Deferred taxes take account of the deferred taxation for differences in valuation between
the IFRS balance sheet and the tax balance sheet as well as differences due to consolidation processes. In addition to tax expenses recognized in the statement of income,
deferred tax liabilities of € 29.3 million (PY: deferred tax receivables € 45.2 million) were
recognized directly in equity in the financial year.
The difference in valuation between the IFRS balance sheet and the tax balance sheet for
shares in partnerships is due partly to estimates. Changes were noted here in the financial year, resulting in deferred tax income of € 25.0 million. This income also needed to be
covered by reserves for deferred premium refunds of – € 23.5 million. The effect of the
change of estimate on the result thus amounted to € 1.5 million.
The expected tax expense was calculated on the basis of the German income tax rate.
This was an unchanged 32 % and took account of 15 % corporation tax, the solidarity
surcharge of 5.5 % on the corporation tax payable and an average trade tax rate.
Taxation
€ million
Reconciliation of taxes on income
Operating result less net interest
x Expected tax rate
= Expected tax expenses
Adjusted to correct for:
Tax-exempt income/expense
Non-deductible withholding taxes
Other tax attributions or deductions
Effects of tax losses
Effects of policyholders’ profit sharing
Taxes for other periods
Change in tax rates
Other effects
= Taxes on income
2010
2009*
107.2
32.0 %
34.3
41.9
32.0 %
13.4
– 39.4
12.5
10.4
–7.0
9.2
2.5
– 4.7
– 1.6
– 24.0
15.1
– 47.6
3.3
6.2
–5.2
0.0
2.7
16.2
–36.1
159
[33]
Other comprehensive
income
€ million
Reconciliation
Unrealized gains and losses on investments available for sale
Recognized in equity
Transferred to the statement of income
Less:
Provision for premium refund
Deferred tax
Total
2010
2009
52.2
– 87.4
–35.2
429.9
14.5
444.4
– 64.2
–3.4
–67.6
366.4
29.4
395.8
32.4
48.6
The unrealized gains and losses transferred to the statement of income resulted partly
from the disposal of securities and realization of the related reserves or losses and partly
from the reversal of the “hidden” losses shown as write-downs in the statement of
income in the event of impairment. In the financial year an expense of € 67.9million
(PY: € 11.1 million) was incurred due to impairment losses. In addition, the separate
reserves resulting from reclassification of securities were amortized.
The unrealized gains and losses recognized in the statement of comprehensive income
result from investments available for sale that remained in the Group portfolio.
160
Representatives of Members
Dr. Martin Willich
Chairman
Managing Director Studio Hamburg GmbH, Hamburg
Konrad Kraft
Vice Chairman
Diplom-Kaufmann, Krailling
Gesine Rades
Vice Chairwoman
Diplom-Kauffrau, Auditor/tax accountant, Noer
Heiner Alck
Physical therapist, Warendorf
Peter Arndt
Diplom-Ingenieur, Berlin
Georg Behre
Diplom-Ingenieur, Authorized Officer of TÜV Rheinland Kraftfahrt GmbH,
TÜV Rheinland Group, Gelsenkirchen
Helmut Berg
Albig
Klaus Bronny
Diplom-Betriebswirt, Corporate consultant, Essen
Prof. Dr. Helmut Cox
Professor of Economics, Economic Policy and Public Economy at the University
of Duisburg-Essen, Ratingen
Up to 18 June 2010
Wilm-Hendric Cronenberg Managing Partner of Julius Cronenberg o.H., Arnsberg
As of 18 June 2010
Werner Dacol
Managing Director of Aachener Siedlungs- und Wohnungsgesellschaft mbH, Cologne
Dr. Heinz Dräger
Dentist, Chairman of the Board of VdZ, Remagen
Sabine Engler
Diplom-Kaufmann, Publicly appointed surveyor Vermessungsbüro Engler, Saarbrücken
Andreas Formen
Diplom-Betriebswirt, Oberursel
Prof. Dr. Klaus Goder
Specialist in General Medicine, Neuss
Gerhard Groß
Independent wholesaler, Mannheim
Bernd Grubel
Diplom-Kaufmann, Darmstadt
Up to 25 March 2010
Horst Horrmann
Minister of Education (Retd), Peine
Walter Hüglin
Master Painter, Weilheim
Norbert D. Hüsson
Betriebswirt, Master Painter, Managing Partner of Hüsson FGB GmbH, Düsseldorf
Bernhard John
Diplom-Ingenieur, Consultant BJ consult + support, Mannheim
Heinz Kiesel
Master Plumber, Munich
161
Bernd Kieser
Diplom-Kaufmann, Managing Partner of ms.conect S.L., Madrid (Spain)
Dr. Ing.
Hans-Herbert Klein
Consulting engineer VBI, Sulzbach
Wolfgang Klemm
Chamber musician, Raesfeld
Peter Ködderitzsch
Textile merchant, Werther
Elke Köhler
Specialist in General Medicine, Vice President of Landesärztekammer Brandenburg,
Executive Officer of Hartmannbund-Verband der Ärzte Deutschlands e. V.,
Chairwoman of Hartmannbund, State of Brandenburg Section, Executive Officer
of Ärzte-Union Brandenburg e. V., Jüterbog
Knut Kreuch
Mayor of the City of Gotha, Günthersleben-Wechmar
As of 18 June 2010
Hans-Otto Kromberg
Diplom-Kaufmann, Managing Partner of Kromberg & Schubert KG, Wuppertal
Dr. Hans-Werner Lange
Chief Executive Officer of TUPAG-Holding-AG, Effelder
Wolfgang Leibnitz
Notary (Retd), Essen
Aribert Lieske
Tax consultant, Düsseldorf
Prof. Dr.
Claus Luttermann
Professor at the Catholic Unversity of Eichstätt-Ingolstadt, Ingolstadt
Hans Mauel
Chairman of the Board of Stiftung der Cellitinnen zur hl. Maria, Erftstadt
Dr. med. Peter Nagel
General practitioner (Retd), Goslar/Hahnenklee
Eckhard Netzmann
Diplom-Ingenieur, Consultant, Berlin
Up to 18 June 2010
Siegfried Nimsch
Diplom-Verwaltungswirt, Erster Polizeihauptkommissar (Redt), Witten
Rudolf Nüllmeier
Diplom-Finanzwirt, Tax accountant, Essen
Christian Oelting
Diplom-Bau-Betriebs-Ingenieur, Managing Partner of DTW Deponie-,
Tief- und Wasserbau GmbH & Co., Pinneberg
Uwe von Padberg
Diplom-Kaufmann, President Verband der Vereine Creditreform e.V.,
Creditreform Köln v. Padberg KG, Cologne
Ilse Peiffer
Secretary, Witten
162
Dr. Angelika Prehn
Specialist in General Medicine, President of Kassenärztliche Vereinigung Berlin,
President of Berufsverband der Allgemeinärzte Berlin und Brandenburg, Berlin
Dr. Roland Reistenbach
Dentist, Siegburg
Jürgen Scheel
Chairman of the Board of Kieler Rückversicherungsverein a. G., Mühbrook
Uwe Schumacher
Oberstudienrat (Retd), Usingen
Walter Stelzl
Ebergötzen
Christian Sutter
Diplom-Kaufmann, Managing Partner of A. Sutter GmbH, Essen
Prof. Dr. jur.
Jürgen Vocke
Judge (Retd), Member of the Landtag of Bavaria,
President of Landesjagdverband Bayern e.V., Ebersberg
Axel F. Waschmann
Executive Officer of EWE Aktiengesellschaft (Retd), Oldenburg
Albrecht Wendenburg
Lawyer and Notary, Celle
Lutz Wittig
Diplom-Physiker, Schwanewede
Up to 18 June 2010
Spokesman:
Albrecht Wendenburg
Lawyer and Notary, Celle
Honorary chairman:
Dr. Karlheinz Gierden
Oberkreisdirektor and Bankdirektor (Retd), Frechen-Königsdorf
Honorary member:
Prof. Dr. A. Wilhelm Klein General Director (Retd), Honorary Chairman of the Supervisory Board
of Gothaer Versicherungsbank VVaG, Cologne
163
Supervisory Board
Dr. Roland Schulz
Chairman
Former Managing Partner,
Düsseldorf
Carl Graf von Hardenberg Chairman of the Supervisory Board of Hardenberg-Wilthen AG, Nörten-Hardenberg
Vice Chairman
Up to 18 June 2010 ordinary Board member
As of 18 June 2010 Vice Chairman
Gabriele Eick
Executive Communications Unternehmensberatung für synchronisierte Kommunikation
und Marketing, Frankfurt am Main
As of 18 June 2010
Jürgen Wolfgang
Kirchhoff
Diplom-Ingenieur, Managing Partner and COO of Kirchhoff Automotive GmbH & Co.,
Iserlohn
Dr. Heiko Lange
Member of Executive Board of Lufthansa (Retd), Bad Soden
Up to 18 June 2010 Vice Chairman
Eberhard Pothmann
Former member of Corporate Management of Vorwerk & Co. KG Group,
Düsseldorf
Dr. Gerd G. Weiland
Lawyer, Hamburg
Honorary Chairmen:
Hansgeorg Klanten
Director (Retd),
Cologne
Prof. Dr. A. Wilhelm Klein General Director (Retd),
Cologne
164
Management
Dr. Werner Görg
Chairman
Cologne
Dr. Helmut Hofmeier
Bergisch-Gladbach
Michael Kurtenbach
Bornheim
Thomas Leicht
Cologne
Jürgen Meisch
Cologne
Dr. Hartmut
Nickel-Waninger
Cologne
Dr. Herbert Schmitz
Cologne
Up to 28 February 2010
The list of names of members of the Supervisory Board and Management consists of information to be provided
in the notes to the financial statements pursuant to section 314(1) No. 6 of the German Commercial Code (HBG).
165
Advisory Board Gothaer Versicherungsbank VVaG
Peter Adler
Co-Owner of Hans Adler oHG, Bonndorf
Andreas Barth
Diplom-Informatiker, Managing Director of OMEGA Blechbearbeitung GmbH,
Limbach-Oberfrohna
As of 1 January 2011
Klaus Michael Baur
Publisher and Editor in Chief Badische Neueste Nachrichten Badendruck GmbH,
Karlsruhe
Richard Borek
Owner and Chief Executive Officer of Richard Borek GmbH & Co. KG, Braunschweig
Dr. Hans Bücken
Chairman of Vereinigte Postversicherung VVaG, Köln
Wilm-Hendric
Cronenberg
Managing Partner of Julius Cronenberg o. H., Arnsberg
Up to 18 June 2010
Peter Ditsch
Managing Partner of Brezelbäckerei Ditsch GmbH, Mainz
Prof. Dr. Dr. h. c.
Axel Ekkernkamp
Medical Director/Managing Director of Unfallkrankenhaus Berlin, Heidesee
Dr. Johannes Evers
Chief Executive Officer of Landesbank Berlin AG, Berlin
Up to 30 April 2010
Dr. Theodor Gräbener
Diplom-Kaufmann, Managing Partner of Theodor Gräbener GmbH & Co. KG,
Wilnsdorf-Rödgen
Werner Hanf
Managing Director of NetCologne Gesellschaft für Telekommunikation GmbH, Cologne
Dieter Härthe
Honorary Consul, Chief Executive Officer Senat der Wirtschaft e. V., Bonn
Andreas Helbig
Diplom-Kaufmann, Chief Executive Officer of Städtische Werke AG, Kassel
Hans Jürgen Hesse
Managing Partner of Hesse GmbH & Co. KG, Drensteinfurt
Peter Hoffmann
Diplom-Betriebswirt, Managing Director of Albatros Versicherungsdienste GmbH,
Büttelborn
Karl Friedrich
Fürst von Hohenzollern
Fully Authorized Representative of Fürst von Hohenzollern Group, Sigmaringen
Willi Hullmann
Chairman of Kölner Wohnungsgenossenschaft eG, Köln
Hans-Dieter Kettwig
Managing Director of Enercon GmbH, Großefehn
Clemens Klinke
Executive Officer of DEKRA SE, Boffzen
As of 1 July 2010
Dr. Karsten Kölsch
Executive Officer of Ahlers AG, Herford
166
Hans Jürgen Kulartz
Executive Officer of Landesbank Berlin AG, Berlin
Andreas Mosler
Diplom-Betriebswirt, Diplom-Wirtschaftsinformatiker,
Spokesman of the Management of Frank Walz- und Schmiedetechnik GmbH, Tornesch
Goetz Neumann
Head Legal, Taxation and Insurance of Wacker Chemie AG, Vaterstetten
Dr. med. Ulrich
Oesingmann
President of Bundesverband der Freien Berufe, Dortmund
Andreas Pieper
Diplom-Betriebswirt, Managing Director of Erste APB Beteiligungen GmbH,
Gelsenkirchen
Hermann Reichenecker
Managing Partner of Storopack Hans Reichenecker GmbH, Metzingen
Christof Renz
Diplom-Ingenieur, Managing Director of Reuther Verpackung GmbH & Co. KG, Krefeld
As of 1 February 2010
Peter Riegelein
Diplom-Kaufmann, Hans Riegelein + Sohn GmbH & Co. KG, Cadolzburg
Klaus Riemenschneider
Chairman of Administrative Board of Endress + Hauser Holding AG, Wehr
Herbert Rohkohl
Corporate Officer, Head Finance and Accounting of Uhl Kies- und Baustoffgesellschaft
mbH, Steinach
Gert Rohrseitz
Managing Director of ECKA Granulate GmbH & Co. KG, Zirndorf
Christian Sander
Diplom-Ingenieur, Managing Director of frisch menü GmbH, Kassel-Harleshausen
Dr. Christoph Schug
Member of Management of HT Troplast GmbH, Mönchengladbach
Up to 1 June 2010
Göran Sjöstrand
Managing Director, CFO of IKEA Deutschland Service GmbH, Königstein
Erich Staake
Diplom-Kaufmann, Chairman of Duisburger Hafen AG, Düsseldorf
F. Michael Stallmann
Diplom-Kaufmann, Managing Director of FMS Capital GmbH, Marl-Polsum
Patrick Tessmann
Executive Officer of Landesbank Berlin AG, Gruenwald
As of 1 May 2010
Alexander Trautmann
Diplom-Ingenieur, Managing Director of DKV Euro Service GmbH & Co. KG, Ratingen
As of 1 June 2010
Dr. Notker Wolf
OSB, Abbott Primate of Benedictine Confederation, Rome
Hans-Joachim Zinser
Managing Partner of Modehaus Zinser GmbH & Co. KG, Tübingen
167
Directorships of Members
of the Supervisory Board and Management
Supervisory board
Membership on other
supervisory boards
Dr. Roland Schulz
Chairman
Gothaer Finanzholding AG,
Chairman
Asstel Lebensversicherung AG,
Chairman
Gothaer Krankenversicherung AG,
Chairman
Gothaer Allgemeine Versicherung AG,
Chairman
Gothaer Lebensversicherung AG,
Vice Chairman
Stüttgen & Haeb AG,
Vice Chairman
Carl Graf von
Hardenberg
Up to 18 June 2010
Ordinary Board member
As of 18 June 2010
Vice Chairman
Gothaer Allgemeine Versicherung AG
Hardenberg Wilthen AG, Chairman
m3Team AG
Volksbank Göttingen
Gabriele Eick
As of 18 June 2010
As of 21 April 2010
Goethe-Universität Frankfurt am Main
(Stiftung)
Jürgen Wolfgang
Kirchhoff
Märkische Bank eG
Dr. Heiko Lange
Up to 18 June 2010
Vice Chairman
Up to 21 April 2010
Lufthansa LSG Sky Chefs AG
Eberhard Pothmann
Frowein & Co. Beteiligungs AG,
Chairman
Vescore Solutions AG, Switzerland,
Administrative Board
Dr. Gerd Gustav Weiland
Asstel Lebensversicherung AG
Reset Consultants AG, Chairman
168
Comparable domestic and
foreign directorships and officerships
Management
Membership on
other supervisory boards
Comparable domestic and
foreign directorships and officerships
Dr. Werner Görg
Asstel Sachversicherung AG,
Chairman
Roland Rechtsschutz-Versicherungs-AG
Gothaer Pensionskasse AG, Chairman
Zweite Gothaer Vermögensverwaltungs AG,
Chairman
EurAPCo AG; Member of the Board
Dr. Helmut Hofmeier
A.S.I. Wirtschaftsberatung AG
Fingro AG, ordinary Board member
up to 27. April 2010,
Vice Chairman as of 27 April 2010,
Gothaer Asset Management AG
Versorgungskasse Gothaer
Versicherungsbank VVaG, Chairman,
Pensionskasse BERLIN-KÖLNISCHE
Versicherungen VVaG,
Chairman
Michael Kurtenbach
A.S.I. Wirtschaftsberatung AG,
Vice Chairman
Gothaer Systems GmbH,
Chairman up to 1 March 2010,
Vice Chairman as of 1 March 2010,
Versicherungen,
Vice Chairman as of 1 March 2010
Thomas Leicht
Janitos Versicherung AG, Chairman
A&O Vertriebs-AG
Ordinary Board member
up to 2 January 2011,
Vice Chairman as of 2 January 2011,
Asstel Sachversicherung AG,
as of 1 March 2011
Polskie Towarzystwo Ubezpieczeƒ
S. A. (PTU),
as of 1 January 2011
Jürgen Meisch
Gothaer Pensionskasse AG
Zweite Gothaer Vermögensverwaltungs AG,
Vice Chairman
Gothaer Asset Management AG, Chairman
Aachener Bausparkasse AG, Chairman
ROLAND Rechtsschutz-Versicherungs-AG
Polskie Towarzystwo Ubezpieczeƒ
S. A. (PTU),
Chairman as of 1 January 2011
Versicherungsbank VVaG,
Versicherungen VVaG, Vice Chairman
Dr. Hartmut
Nickel-Waninger
Janitos Versicherung AG, Vice Chairman
Asstel Sachversicherung AG, Vice Chairman
A&O Vertriebs-AG, Chairman
A.S.I. Wirtschaftsberatung AG, Chairman
Fingro AG, Chairman,
Gothaer Pensionskasse AG,
Vice Chairman as of 1 March 2010
Dr. Herbert Schmitz
up to 28 February 2010
Asstel Sachversicherung AG
Zweite Gothaer Vermögensverwaltungs AG
ROLAND Schutzbrief-Versicherung AG,
up to 31 December 2010
Gothaer Systems GmbH, Vice Chairman,
Versicherungsbank VVaG, Vice Chairman
Deutsche BKK, Administrative Board
169
Other Information
Personnel expenses
€ million
2010
2009
Wages and salaries
Social security contributions and employee benefits
Expenses for employees’ pensions
281.4
43.3
3.1
279.4
45.9
15.4
Total
327.8
340.7
2010
2009
4,205
647
4,852
4,281
679
4,960
180
230
191
199
5,262
5,350
Number of employess (average for the year)
Breakdown by group of employee
In house
Field
Apprentices
Employees of joint-venture undertakings
Total
Remuneration of members of the Supervisory Board and Management
Disclosures pursuant to
section 314 (1) No. 6
of the German
Commercial Code (HGB)
In the financial year management received remuneration in the amount of € 5.1 million
(PY: € 5.0 million). Retirement and survivors’ benefits for former members of management came to € 2.2 million (PY: € 2.1 million). Further accruals in the amount of € 16.9
million (PY: € 21.3 million) exist for current pensions and pension entitlements for this
group of individuals.
Remuneration paid to the Supervisory Board came to € 0.9 million (PY: € 0.7 million).
Remuneration paid to members of the Advisory Board came to € 0.1 million (PY: € 0.2
million). No amounts were paid to former members of the Supervisory Board and the
Advisory Board, or deferred.
Loans in the amount of € 0.1 million (PY: € 0.2 million) were granted to members of
Management and the Supervisory Board in the financial year. The interest rate was 2.5 %
and the remaining term 5 years.
Disclosures pursuant to
IAS 24.16
170
Key management personnel, i. e. Management of Gothaer Finanzholding, received remuneration in the amount of € 5.3 million (PY: € 5.0 million) in the financial year. Provisions
in the amount of € 9.9 million (PY: € 11.1 million) were established for pension benefits to
be paid to this group of individuals upon termination of the employment relationship.
Auditors’ fees
€ million
Breakdown by type of service
2010
2009*
Auditing of financial statements
Other services
1.3
0.2
1.3
0.3
Total
1.5
1.6
Provisions and contingent liabilities
The information on provisions and contingent liabilities provided herein goes beyond that
required by IAS 37, according to which disclosure is required only in cases in which an
outflow of funds is not improbable. Although this does not apply in the case of the
Gothaer Group, information is disclosed pursuant to sections 251 and 285 No. 3 HGB.
The Group has contingent liabilities in the amount of € 30.1 million (PY: € 49.6 million).
This amount is accounted for virtually completely by surety insurance of the former
Gothaer Credit Versicherung AG.
Contingent assets
The Group has a contingent asset of € 11.9 million (PY: € 1.1 million). This relates to the
purchase price receivable from the sale of a participation, which has been deposited in
a trust account. The receipt of this receivable is considered very likely.
Other financial commitments
The Group has liabilities in the amount of € 348.6 million (PY: € 417.1 million) arising from
commitments to make payments in connection with investments. Capital calls are possible within the contractually defined period as a matter of principle.
Asstel Sachversicherung AG, Gothaer Allgemeine Versicherung AG and Janitos Versicherung AG are members of “Verkehrsopferhilfe e. V.”. Membership entails an obligation to
contribute to the funds this association requires to carry out its activities. Contributions
are based on the respective shares of the premium income generated by member companies from direct motor and liability insurance in the year prior to the past calendar year.
Group companies also belong to insurance pools such as Deutsche KernreaktorVersicherungs-Gemeinschaft and Pharma-Rückversicherungsgemeinschaft. In the event
of default on the part of any of the other members, the respective Group company is
obligated to assume its pro rata share of any such default. Shares are also held in
EXTREMUS Versicherungs-AG.
171
In accordance with sec. 124 ff of the German Insurance Supervision Act (VAG), the life
insurance companies of the Group are members of the guarantee fund for life insurers
(Sicherungsfonds für die Lebensversicherer). In addition to the obligatory current
contributions, the fund can levy special contributions up to 1 ‰ of the sum of net underwriting reserves on the basis of the Guarantee Fund Financing Ordinance (Life). Furthermore, the companies have committed to make financial resources available to the
guarantee fund – or alternatively to Protektor Lebensversicherungs-AG – in the event of
the fund not having the resources needed to handle a rescue case. This commitment
amounts to 1 % of the sum of net underwriting reserves less contributions already made
to the guarantee fund. The total commitment to the guarantee fund at balance sheet date
was € 152.0 million.
On the basis of statutory amendments to sec.124 ff VAG, health insurers are also required
to become members of a guarantee fund. After the assumption of insurance contracts, the
fund can levy special contributions up to 2 ‰ of the sum of net underwriting reserves for
the fulfilment of its duties. The commitment in the area of health insurance is € 9.3 million.
Underwriting pools and coinsurance
In the area of syndicated life insurance, data are used as reported by the lead manager
of the syndicates. In the case of syndicated business under our management, proportionate values are used; such business is otherwise accounted as primary business.
In the area of health insurance, a coinsurance arrangement is in place that involves a
group of private insurance companies that provide long-term care coverage under the
Long-Term Care Insurance Act of 26 May 1994 for members of the health insurances for
postal and railway civil servants. The association of private health insurers (PKV) prepares
financial statements and settles accounts with the individual member insurance companies on a pro rata basis, and the results of these accounts flow into the consolidated
financial statements.
172
Basis for allocation of interest to policyholders
In the case of conventional products, interest is allocated to policyholders in the area of
life insurance in the form of a guaranteed interest credit on the one hand and a surplus
sharing on the other hand. The bonus is determined by Management on the basis of legal
provisions. In the case of unit-linked products, policyholders assume the risk of any
investment losses. No interest credits are made in this case.
The distribution of any surplus in connection with private health insurance is subject to
the provisions of national legislation, in particular the German Insurance Supervision Act
(VAG) and an ordinance that governs the determination and distribution of surplus interest and profit for health insurance plans (ÜbSchV).
Pursuant to section 12b VAG, any transfer of funds from reserves for premium refunds is
essentially subject to the approval of an independent trustee. The trustee must verify in
particular that the interests of the insured and especially of older insured are adequately
protected.
Section 12a(1) VAG stipulates that holders of health insurance policies and voluntary longterm care insurance (care cost and daily allowance) that resemble life insurance are
entitled to an annual credit for interest on the total positive balance of the ageing reserve
for the respective insurance as of the end of the previous financial year. This credit is
equal to 90 % of the average investment result in excess of the basic actuarial interest rate
used (surplus interest). The funds accumulated in this manner are used for the most part
to partially or completely finance increases in premium payments resulting from premium
increases in the case of insureds who have reached the age of 65 and also to reduce
premiums in the case of insureds who have reached the age of 80.
Section 12a(1) VAG requires that at least 80 % of the surplus determined on the basis of
the respective regulatory requirements be allocated to the reserve for premium refunds
(with separate accounts for health insurance organized along the lines of life insurance
and for private compulsory long-term care insurance).
173
Related party disclosures
In Gothaer’s claims settlement department, a framework agreement exists for handling
legal proceedings relating to motor processes and liability events involving parties
related to the Group. Remuneration was based at most on the statutory provisions of
the German Lawyers’ Remuneration Act. Fees of € 0.3 million (PY: € 0.2 million) were
paid by Gothaer in the year under review. In addition, the sum of € 0.8 million (PY:
€ 0.8 million) was subscribed to our member bond by related parties.
Gothaer Allgemeine Versicherung AG and Gothaer Finanzholding AG granted credit
totalling € 11.6 million to related parties in the context of financial relationships.
Liabilities and receivables totalling € 3.2 million were transferred by a related party to
Gothaer Lebensversicherung AG. These transactions were conducted under normal
market terms and conditions.
Various service functions in the Gothaer Group – such as claims and benefit settlement
or retirement planning services – have been outsourced to separate companies. Some
of those service companies have not been included in the scope of consolidation on
grounds of immateriality. Standard market service agreements have been concluded
with the companies. Below is a report on business relationships with non-consolidated
companies that are materially important in the eyes of the Gothaer Group.
GSC Gothaer SchadenService-Center GmbH
GSC Gothaer Schaden-Service-Center GmbH carries out communication-intensive
business processes (call centers) and other services and also adjusts claims for Gothaer
Allgemeine Versicherung AG and Gothaer Versicherungsbank VVaG.
Revenues in the amount of € 11.8 million (PY: € 12.8 million) in 2010 were received
exclusively from companies of the Gothaer Group, with Gothaer Allgemeine Versicherung
AG accounting for 97.9 % of the total. At € 6.6 million (PY: € 6.5 million), personnel
expense represented the most important expense item in the statement of income.
Receivables from affiliated companies amounted to € 11.9 thousand (PY: € 66.7 thousand). Liabilities towards affiliated companies in the amount of a total of € 4.1 million
(PY: € 2.8 million) consist to 89.7 % of liabilities towards Gothaer Allgemeine
Versicherung AG, including a loan in the amount of € 1.7 million to Gothaer SchadenCenter-Service GmbH.
174
GKC Gothaer KundenService-Center GmbH
GKC Gothaer Kunden-Service-Center GmbH performs services involving communicationintensive business processes (call centers) as well as other services such as policy
processing and sales support for the insurance companies of the Gothaer Group. Its
principal client is Gothaer Allgemeine Versicherung AG but services are increasingly
performed for Asstel Sachversicherung AG, Asstel Lebensversicherung AG and Gothaer
Lebensversicherung AG.
63.7 % of the revenues in the amount of € 31.7 million (PY: € 31.5 million) recorded in
2010 resulted from the processing of contractually defined business transactions and the
handling of telephone queries in connection with the private customer business of
Gothaer Allgemeine Versicherung AG. Revenues were offset in particular by personnel
expense in the amount of € 13.8 million (PY: € 10.9 million) and other operating expenses
in the amount of € 15.1 million (PY: € 18.1 million). The latter amount includes mainly
start-up costs for EDP and communication systems.
Receivables from affiliated companies amounted to € 2.6 million (PY: € 2.3 million) in
the financial year, the lion’s share relating to Gothaer Allgemeine Versicherung AG as
well. Liabilities towards affiliated companies totalled € 19.7 million (PY: € 20.1 million),
€ 17.4 million of which related to a loan granted by Gothaer Finanzholding AG.
Pensus
Pensionsmanagement
GmbH
Pensus Pensionsmanagement GmbH is responsible for the administration of pension
plans for private and public sector companies and customer support. Revenues received
from companies of the Gothaer Group, in particular Gothaer Lebensversicherung AG,
Gothaer Allgemeine Versicherung AG and Gothaer Versicherungsbank VVaG, accounted
for € 1.7 million (PY: € 1.9 million) of total revenues in the amount of € 0.8 million for 2010
(PY: € 0.7 million). As in the previous year, personnel expenses came to € 1.1 million.
Liabilities amounted to € 1.1 million (PY: € 1.1 million) and receivables to € 0.5 million
(PY: € 0.6 million) of which € 0.1 million (PY: € 0.1 million) from affiliated companies.
175
Leasing
Finance leases were terminated in the financial year. They were used exclusively for DP
hardware (net carrying amount of PY: € 3,8 million).
Minimum
lease payments
€ million
Finance leases
2010
2009
Up to 1 year
1 to 2 years
2 to 3 years
3 to 4 years
4 to 5 years
5 to 10 years
After 10 years
0.0
0.0
0.0
0.0
0.0
0.0
0.0
1.9
1.9
1.8
0.0
0.0
0.0
0.0
Total
0.0
5.6
Operating leases are used mainly for DP software and hardware as well as company
vehicles. The lease contracts were concluded under standard market conditions. Total
future minimum lease payments in connection with operating leases come to € 48.0 million (PY: € 80.5 million). This amount is shown below according to payment terms.
Minimum
lease payments
176
€ million
Operating leases
2010
2009
Up to 1 year
1 to 2 years
2 to 3 years
3 to 4 years
4 to 5 years
5 to 10 years
After 10 years
39.1
6.5
2.0
0.3
0.0
0.0
0.0
46.1
24.5
9.3
0.6
0.0
0.0
0.0
Total
48.0
80.5
Post-balance sheet events
We refer to our statement in the outlook. No events occurred after the reporting date that
would require separate disclosure.
The management of Gothaer Versicherungsbank VVaG approved the consolidated financial statements for submission to the Supervisory Board on 21 April 2011. The Supervisory
Board is responsible for examining the consolidated financial statements and issuing a
statement as to whether or not it approves the consolidated financial statements.
Cologne, 21 April 2011
Management
Dr. Werner Görg
Dr. Helmut Hofmeier
Michael Kurtenbach
Thomas Leicht
Jürgen Meisch
Dr. Hartmut Nickel-Waninger
177
Auditor’s Report
We audited the consolidated financial statements prepared by Gothaer Versicherungsbank VVaG, Cologne – consisting of the statement of financial position, statement of
comprehensive income, statement of changes in equity, statement of cash flows and
notes to the consolidated financial statements – and the Group management report for
the financial year from 1 January to 31 December 2010. In accordance with the International Financial Reporting Standards (IFRS) as applied in the EU and the complementary provisions of commercial law pursuant to Section 315a(1) of the German Commercial
Code (HGB), management of the parent company is responsible for the preparation of the
consolidated financial statements and the Group management report. Our responsibility
is to provide an opinion on the consolidated financial statements and the Group management report on the basis of our audit.
We conducted our audit of the consolidated financial statements in compliance with
section 317 HGB and the German generally accepted principles for the audit of annual
financial statements issued by the Institut der Wirtschaftsprüfer (IDW). Accordingly, an
audit is to be planned and performed to obtain reasonable assurance of detecting material misstatements or non-compliance with laws and regulations in the presentation of
the net assets, financial position and results of operations in the consolidated financial
statements and the Group management report in accordance with applicable accounting
principles. Auditing procedures are determined to take into account knowledge of the
business activities as well as of the economic and legal context of the Group and an
evaluation of possible misstatements. The audit includes an assessment of the efficacy
of the internal system of control procedures and, primarily on a test basis, examination
of evidence supporting amounts and disclosures in the consolidated financial statements
and the Group management report. The audit includes assessment of the annual financial statements of consolidated companies, the scope of consolidation, the accounting
and valuation principles applied and significant estimates made by the management of
the company as well as evaluation of the overall presentation of the consolidated financial statements and the Group management report. We believe that our audit provides a
sufficiently reasonable basis for our opinion.
Our audit resulted in no reservations.
In our opinion, based on the findings of our audit, the consolidated financial statements
comply with IFRS, as applied in the EU, and the complementary provisions of commercial
law pursuant to section 315a(1) HGB and give a true and fair view of the net assets, financial position and results of operations of the Group in accordance with these requirements. The Group management report is consistent with the consolidated financial statements, conveys a true and fair view of the situation of the Group and accurately presents
the opportunities and risks of future developments.
Cologne, 11 May 2011
KPMG AG
Wirtschaftsprüfungsgesellschaft
(Dr. Ellenbürger)
Wirtschaftsprüfer
178
(Dr.Dahl)
Wirtschaftsprüfer
Report of the Supervisory Board
The Supervisory Board continuously monitored the conduct of business by management
in the course of the reporting period in fulfilment of its duties under the law and the
bylaws of the Company. Management regularly submitted written reports on business
developments and the situation of the Company and reported orally to the Board at six
meetings. The committees of the Board were also involved in informational and oversight
activities. The Investment Committee, the Audit Committee and the Executive Committee
each met three times.
The issues addressed regularly included developments in premiums, claims and costs,
the performance of major Group holdings and the impact of such developments on the
financial statements. The Supervisory Board also monitored the development of membership figures and the measures taken to raise the standard of service and advice for the
exclusive organization as well as the development of types of future-compliant agency
and processes. The Board maintains a regular dialogue with Management on key strategic
issues for the future gearing of the Group. Certain aspects of the range of topics are presented and submitted for discussion by executives within the Group.
Management regularly informed the Supervisory Board of its mid-term corporate planning, the solvency developments, the risk strategy and the risk situation of Group companies. In addition, the Audit Committee set up by the Board in accordance with section
107 (3) of the German Stock Corporation Act (AktG) monitored the accounting process,
the effectiveness of the internal monitoring system, risk management system and internal auditing system and engaged in detailed discussion with Management and the
auditors of the annual accounts on the valuation of investments in the balance sheet
presented. Management reported to the Supervisory Board in depth on developments
on the capital markets and the resultant effects on investments and investment result,
and discussed the possible effects of the financial market crisis on the macroeconomic
developments with its implications for the insurance industry. Investment guidelines were
discussed in detail and adapted to meet increased requirements.
Reports also covered the performance of strategic holdings, the distribution channels
used by the Group companies and the measures adopted to promote structural change
processes and optimize cost structures. In furtherance of the internationalisation strategy
of the Gothaer Group, Gothaer Finanzholding AG has meanwhile, with the approval of the
supervisory authority, concluded purchase agreements for a total 77.1 % share in the
capital of Polish property/casualty insurer Polskie Towarzystwo Ubezpieczeƒ S. A., a move
that gives it 76.9 % voting rights in the company.
The Supervisory Board performed its statutory duty to examine Management personnel
matters, devoting particular attention to the issues of remuneration. Management also
informed the Board about the latest requirements that remuneration systems in the
insurance industry need to meet for compliance with the Insurance Remuneration Ordinance (VersVergV) introduced in 2010.
179
The Chief Risk Officer briefed the Supervisory Board on the risk management report for
2009 and progress in the area of risk management. The Group Audit Manager reported to
the Supervisory Board on the results of audits carried out 2009 and the audit plan for
2010.
The financial strength ratings carried out for Group companies in 2010 also resulted in
positive findings. The ratings document the continued security and financial strength of
the Group. Gothaer Allgemeine Versicherung AG and Gothaer Lebensversicherung AG
again confirmed the ratings received in the past from Standard & Poor’s (A–) and
FitchRatings (A). Gothaer Krankenversicherung AG confirmed both its Assekurata rating (A)
and its rating by Standard & Poor’s (A–).
The financial statements for the 2010 financial year with the management report and the
consolidated financial statements for 2010 prepared in accordance with IFRS and the
Group management report were audited, including in each case assessment of the earlywarning system, by the auditor appointed pursuant to section 341k HGB, KPMG AG
Wirtschaftsprüfungsgesellschaft, Cologne.
Both sets of financial statements received an unqualified audit opinion from the audit
firm. The auditors attended the corresponding meetings of the Supervisory Board and
reported on the material results of the audit.
The Supervisory Board received the audit reports submitted and took note of and
approved the results of the audits.
After examination of the presented financial statements and management report for the
2010 financial year and the consolidated financial statements and Group management
report for the 2010 financial year, the Supervisory Board raised no objections. The Supervisory Board approved the financial statements and the consolidated financial statements
for the year 2010. The financial statements are therefore adopted pursuant to section 172
of the German Stock Corporation Act (AktG).
The Supervisory Board approves Management’s proposal for the use of retained profit.
The Supervisory Board thanks Management and all employees of the Gothaer Group for
their work in the course of the past year.
Cologne, 11 May 2011
The Supervisory Board
Dr. Roland Schulz
Chairman
180
Addresses of Major Group Companies
Arnoldiplatz 1
50969 Cologne
Telephone 0221 308-00
Internet
www.gothaer.de
Arnoldiplatz 1
50969 Cologne
Internet
www.gothaer.de
Arnoldiplatz 1
50969 Cologne
Internet
www.gothaer.de
Gothaer Lebensversicherung AG
Arnoldiplatz 1
50969 Cologne
Internet
www.gothaer.de
Gothaer Krankenversicherung AG
Arnoldiplatz 1
50969 Cologne
Internet
www.gothaer.de
Gothaer Pensionskasse AG
Arnoldiplatz 1
50969 Cologne
Internet
www.gothaer.de
Asstel Lebensversicherung AG
Schanzenstr. 28
51063 Cologne
Telephone 0221 9677-677
Internet
www.asstel.de
Asstel Sachversicherung AG
Schanzenstr. 28
51063 Cologne
Telephone 0221 9677-677
Internet
www.asstel.de
Im Breitspiel 2-4
69126 Heidelberg
Telephone 06221 709-1000
Internet
www.janitos.de
Gründlinger Str. 12
79111 Freiburg
Internet
www.cargarantie.de
181
Gothaer
Versicherungsbank VVaG
Arnoldiplatz 1
50969 Cologne
Tel. 0221 308-00
Fac. 0221 308-103
www.gothaer.de

The Gothaer Group Annual Report 2010

Transcription

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